Raheja, Unitech head for LSE to raise $1 bn

Real estate companies have found an alternative way of raising money. Two realty firms "" K Raheja and Unitech "" are in the process of raising at least $1 billion from the alternative investment market (AIM) of the London Stock Exchange.

Real estate sources said the two groups would raise $500 million each from the AIM in three-four months. Sources close to the Raheja group said the company would float a special purpose vehicle (SPV) for a particular project that would get listed with the AIM in three months.

The group has appointed Enam Financial Consultants for the purpose, they added. They said the Unitech group would follow the SPV model as well.

Unitech, on its part, would be advised by J M Morgan Stanley.

"An SPV for a particular project tends to realise better prices if it is listed with an exchange, rather than what a private equity investor may offer," explained the head of a Mumbai-based financial services company.

Sources said the primary advantage of listing with AIM was that it did not require a minimum public shareholding, prior trading record and minimum market capitalisation.

Admission documents are not pre-vetted by the exchange or by the UK Listing Authority in most circumstances.

With these advantages, AIM is fast becoming the Nasdaq for old economy companies.

The sources pointed out that raising funds from AIM through dilution of equity would also help companies overcome the liquidity problem, with the Reserve Bank of India asking banks to be more cautious in funding real estate projects.

In addition, listing with AIM would enhance the profile of companies as it would mean increase in status and credibility.

An AIM listing would also provide a range of tax benefits, including capital gains tax.