Buoyed by a jump in residential sales, a slew of property developers are looking to tap the capital market through initial public offerings (IPOs), sources in the know said. The prominent ones include NCR-based affordable housing developer Signature Global, Mumbai-based Kalpataru and Puranik Builders, among others. Signature Global, which has about 20 million square feet of affordable housing in states such as Haryana, is looking to come out with an IPO within this year , said a source aware of the development. Pradeep Aggarwal , the company’s chairman, declined to comment on the company’s IPO plans.
“Earlier also they tried but could not come up with an IPO, because of market conditions. Since real estate markets have bounced back, they feel it is a good time,” said the source.Most of the company’s projects are in Haryana and it plans to expand in the National Capital Region (NCR) in the future, sources said. Mumbai-based Kalpataru is also looking to launch an IPO and has started the spadework on the same, said sources, adding that the developer has already appointed an investment banker for the same.
Besides funding its developments, the company plans to reduce its debt through an IPO, sources said. Kalpataru raised about Rs 750 crore from Asia-focused fund manager PAG last year, in one of the biggest debt deals in the real estate space. The fund raise was to finance its two projects and refinance some loans. A mail sent to Kalpataru did not elicit any response.
Puranik Builders, which got approval from capital markets regulator Sebi in November last year, is also expected to launch its IPO early this year. The company refiled its draft red herring prospectus the third time last year and plans to come out with an issue that comprises a fresh sale of shares worth Rs 810 crore, and secondary market sale of shares by promoters and existing shareholders.Edelweiss Financial Services and Axis Capital are its merchant bankers.
Though there is a buzz around Mumbai-based Runwal Group and Rustomjee Group planning to go public , senior executives in both the groups denied it.“We talk to investors and bankers as part of the business but there is no plans to launch an IPO,” said Boman Irani, chairman of Rustomjee.Similarly, investment bankers have made presentations to the top management of Runwal Group on the public issue prospects but the latter has not taken any decision on the same, sources said. The last IPOs in this space was from Macrotech Developers, the flagship firm of Lodha and Sriram Properties, in April 2021 and December 2021, respectively.
Both issues came almost after a gap of 10 years in the real estate space. Both fund managers and bankers say that the good uptick in residential real estate has prompted developers to look at the capital market route seriously.Amit Goenka, chief executive & MD of Nisus Finance, a fund manager, said: “Real estate has seen a significant uptick in values and volumes for major players in the last 12 months. With opportunities to acquire additional land banks or stressed assets, and deleverage their balance sheets, major players are eyeing the IPO market.
There is significant liquidity both domestically and globally for growth companies in India. The current buoyancy makes it apt to raise capital, he said , adding, “Major brokerage houses and stock analysts are bullish on construction stocks.” According to Anarock Property Consultants , housing sales in the top seven cities rose 71% y-o-y in 2021, with about 2.37 lakh units sold, thus reaching 90% of pre-Covid 2019 levels. The MMR recorded the highest sales at 76,400 units, followed by the NCR with about 40,050 units sold.
Of the four quarters of 2021, Q4 was by far the best, with housing sales in the top seven cities attaining a new high of about 90,860 units in Q4 of 2021. This was the highest quarterly sales performance since 2015, Anarock said. Saurabh Shatdal , MD, capital markets, Cushman & Wakefield, said that public markets have always been a very good source of capital for healthy corporates. Real estate saw consolidation over the last 3-5 years, it was undergoing reforms like RERA, GST and so on, which required a lot of catching up with other businesses. Further, Covid did create a panic situation and hence most developers were focused on managing the house and making it more adaptable and robust from changing environment compliance standpoint. Now with all this behind, developers have realised the importance of institutional and public markets and hence they were seeing good developers planning for IPOs, he said.
“The residential sales are looking good, inventory overhang has reduced, commercial and industrial activity is picking up. These are euphoric times and hence tapping public markets is an opportune time for good developers which will help them adequately capitalise their businesses,” he said.