Domestic realty companies, which are planning to tap the primary market, may not see smooth sailing, as the Dubai debt crisis is likely to undermine investor confidence in the sector. As many as nine realty companies, including Emaar MGF, have filed their draft red herring prospectus (DRHP) with the market regulator, Sebi, aiming to raise about Rs 15,000 crore.
“It will not be surprising if some realty companies defer their share sale plan. The Dubai debt crisis will not give any positive signal to investors in realty companies and IPOs of companies, like Emaar MGF, will face huge challenge,” SMC Capitals’ equity head Jagannadham Thunuguntla said.
According to the DRHP filed with Sebi, nine relators are planning to raise an estimated Rs 15,000 crore through the initial public offers (IPOs). These include Emaar MGF’s Rs 4,000-crore issue, followed by Sahara Prime City (Rs 3,400 crore), Lodha Developers (Rs 2,700 crore), BPTP (Rs 2,000 crore), and Godrej Properties (Rs 500 crore).
“The realty IPOs will find it tough to sail through. Although investor confidence in the secondary markets have revived in the past six months, the primary markets are yet to witness such revival,” Unicon Financial chief executive Gajendra Nagpal said.
Analysts point out that leading realty companies, like DLF and Parsvanath, which hit the market during the real estate boom in 2007, are now trading at about 70 per cent discount. It can be recalled that market leaders like DLF, Parsvanath, Omaxe, Sobha Developers and HDIL had cashed in on the real estate boom in 2007 by going public.
Analysts feel the companies, which plan to tap the capital markets through IPOs, should not go in for aggressive pricing, as that may pour more cold water onto the already dampened investor sentiment.