Indore-based Entertainment World Developers Ltd (EWDL), a leading mall developer in tier-II and III cities, plans to raise up to Rs 500 crore through an initial public offering (IPO) in the first quarter of FY13, a top company official said.
The company has already filed a red herring draft prospectus (DHRP) with the markets regulator and will use the proceeds to develop more malls in smaller cities and towns, where demand for organised retail is growing rapidly.
"We plan to hit the capital markets in the first quarter of the next fiscal. We have recently filed the DHRP, but we plan to have the public issue next year, by which time the company will attain a scale in terms of revenues and number of malls. We are looking at a 30% dilution (of stake)," EWDL Managing Director Manish Kalani told PTI on the sidelines of the India Shopping Forum here.
The merchant bankers to the issue are ICICI Securities, Kotak Bank and Edelwiss, he said.
The proceeds will be used for construction of ongoing projects and to buy back some of the convertible debt issued by a unit to funds run by ICICI Venture and Mumbai-based high-street mall developer Phoenix Mills, which owns a 40.3% stake in the company.
EWDL, which is also developing residential townships in smaller cities, plans to open 10 more malls by the end of this fiscal. Of these, five malls are under various stages of development and will open this calender year, EWDL CEO Arif Sheikh said.
"We are doing extremely well in smaller cities due to our first-mover advantage and secondly, due to the 100% lease model. The model is yielding good bottom-line for our retailers, whereas in the sale model, it adds to the top-line," Sheikh said.
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EWDL is the only retail real estate developer in India that works on a 100% lease model, meaning they only lease out and don't sell the space, he added.
The new malls will come up in Raipur, Jabalpur, Bhillai, Indore and Chandigarh with a total area under operation of 25 lakh square feet.
At present, EWDL has three shopping malls, two in Indore and one in Nanded, with total area of 15 lakh square feet.
The company devotes around 30-40% of its total space in a mall for an entertainment and gaming zone, Sheikh said, adding that an area of around 1 lakh square feet has been used to set up a roller coaster in the upcoming mall in Raipur.
With anchor retailers such as Big Bazaar, Max and Pantaloons, EWDL ties up with regional brands rather than national or international ones in smaller cities, which according them, is another reason why their malls have a good IRR of 27% against the industry average of 19%.
The group is eyeing a consolidated revenue of Rs 700 crore in FY12 as against Rs 400 crore in FY11. It also plans to double its mall portfolio in the next 5 years.