Enthused by improving market conditions, eight real estate firms including Unitech, Parsvnath and Sobha Developers are looking to raise more than Rs 25,000 crore together through sales of shares, mostly to foreign investors.
After struggling for funds and soaring debt levels in the recent months due to a slump in property as well as financial markets, these firms are now looking to raise about Rs 3,000 crore by issuing convertible warrants to their promoters, while more than Rs 22,000 crore is intended to be raised from institutional investors such as FIIs.
Those looking to raise "additional long-term funds" through sale of shares, mostly through Qualified Institutional Placement (QIP), where shares are sold to institutional investors, include Unitech, Parsvnath, Sobha Developers, HDIL, Puravankara, Anantraj Industries, Akruty City and Orbit Corp.
Unitech, HDIL and Orbit Corp are also looking to raise funds by issuing convertible warrants to their promoters.
Unitech tops the tally with plans to raise over Rs 11,000 crore.
It is followed by HDIL (about Rs 3,000 crore through QIP and Rs 850 crore through promoter warrants), Parsvnath and Akruty (Rs 2,500 crore each), Anantraj (Rs 2,000 crore), Sobha Developers (Rs 1,500 crore), Puravankara (Rs 750 crore) and Orbit Corp (Rs 500 crore through QIP and an unidentified amount through promoter warrants).
Some firms such as Parsvnath have also sought increase in their FII shareholding limit, indicating that foreign investors are high on their radar for raising funds.
The boards of most of these companies have approved these fund-raising plans. In addition, Ansal Properties and Infra's board was scheduled to meet on June 2 "to consider matters of raising of funds for business purposes", but the meeting got adjourned.
Interestingly, the targeted fund size exceeds the cumulative free-float market capitalisation of these companies, which currently stands at about Rs 16,000 crore.
Even the total market capitalisation of these companies, after taking into account the promoter holdings, is just over Rs 40,000 crore — meaning that the target funds are equivalent to more than half the total valuation of these companies.
The country's entire real estate sector has a total market capitalisation of about Rs 1,25,000 crore and a free- float market cap of about Rs 44,000 crore.
However, the sector valuation is still nearly half the level it had seen at the peak of the stock market in January last year, although it has nearly doubled from the lows seen late last year.
The slump in the stock market had blocked the companies' plans to raise funds through equity last year, when the debt costs had also soared to high levels due to increase in interest rates and tough liquidity conditions.
The strong interest in garnering funds through QIPs follows the three leading real estate players — DLF, Unitech and Indiabulls Real Estate — together raising more than $1.6 billion (about Rs 7,500 crore) through this route in recent weeks and the strong demand seen from the foreign investors in these deals.
DLF and Indiabulls Real Estate raised $760 million and $550 million, respectively, last month, while Unitech raised $325 million through sales of shares to institutional investors in April.
Unitech has now sought shareholders' approval for raising about Rs 1,150 crore from its promoters and also issuing up to 100 crore shares to institutional investors. These shares are worth close to Rs 10,000 crore at the current market price.
