Brookfield India REIT IPO: Raises Rs 1,700 crore from anchor investors; should you subscribe?

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Updated: February 03, 2021 11:04 AM

The Rs 3,800-crore global investment firm Brookfield's Real Estate Investment Trust (REIT) initial public offer (IPO) has opened for subscription on Wednesday, at a price band of Rs 274 to Rs 275.

Brookfield India REIT IPO, Brookfield REIT, initial public offerThe previous two REITs (Embassy Office Parks and Mindspace Business Parks) have proved to be successful in terms of capital appreciation and consistent dividend payouts. Image: Reuters

The Rs 3,800-crore global investment firm Brookfield’s Real Estate Investment Trust (REIT) initial public offer (IPO) has opened for subscription on Wednesday, at a price band of Rs 274 to Rs 275. The firm on Tuesday raised Rs 1,710 crore from anchor investors, where 6.21 crore units were subscribed at a bid price of Rs 275 per unit. The anchor investors included financial institutions such as HDFC AMC, SBI Life, Tata AIG, HDFC Life, Kotak Mahindra AMC, and Bajaj Holdings, among others. The public issue will close on Friday, February 5, 2021. The company owns a portfolio of four office parks located at Noida, Kolkata, Gurugram and Mumbai with a size of 14 million square feet.

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Gaurav Garg, Head Research, CapitalVia Global Research Limited, told Financial Express Online, that at the upper limit of the price band, the REIT is available at a good discount compared to its peers and hence an investor interested in this space can go for subscription to the IPO. The company has got stability with respect to its cash flows from long term leasing contracts. Moreover, there was not much of an impact because of COVID-19 pandemic as they were able to collect 95 per cent of their revenue during the period.

Bids can be made for a minimum lot of 200 units and in multiples of 200 units thereafter. The shares are proposed to be listed on BSE and NSE. Brookfield REIT will be the third real estate investment trust to be listed in India. The first was Embassy Office Parks REIT, which got listed in April 2019 after raising Rs 4,750 crore. Mindspace Business Parks REIT, was listed in August 2020 amid COVID-19 pandemic after raising Rs 4,500 crore.

The previous two REITs (Embassy Office Parks and Mindspace Business Parks) have proved to be successful in terms of capital appreciation and consistent dividend payouts. Abhay Doshi, Founder, UnlistedArena.com — dealing in Pre-IPO & Unlisted Shares — told Financial Express Online, that the real estate sector is showing some signs of spurt and work from home (WFH) concept may not be much relevant as the vaccination drive has started. “Concentrated portfolios seem to be the only negative for this REIT. The issue price is at a considerable discount to the NAV as compared to other listed REITs, investors looking for alternative asset classes should find this IPO attractive,” Doshi added.

Analysts at Angel Broking have given a ‘neutral’ rating to the issue on the back of uncertainties, weak financials and high debt on book. Though the REIT has incurred losses in FY20 and has not paid out any dividends, they expect to pay a yield of 7.5% in FY23 which analysts at Angel Broking Ltd believe is aggressive and may be difficult to achieve. “Post the IPO there will also be a debt reduction of Rs 3,575 crore for the company which will bring down the overall debt. However, due to the current uncertainties around Covid-19 and proliferation of work from home we expect that demand for commercial real estate to be muted,” the analysts added.

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