The promoters of realty firms in India are wary of selling stake. They are choosing institutional placement programme (IPP) over share auction to bring down holding to comply with regulatory norms. The latest to join this bandwagon is Bangalore-based Puravankara Projects, which plans to raise around Rs 450 through.
Investment banker JP Morgan has the mandate and placement of shares will happen in a couple of weeks in the price range of Rs 100-110, said a source involved with the deal. Puravankara will sell 45 million shares.
The management team comprising CMD Ravi Puravankara, joint MD - Ashish Puravankara, Group CEO Jackbastian Kaitan Nazareth and CFO Anil Kumar are conducting road shows since Monday. The team is meeting mutual/insurance fund managers in Mumbai and would meet global investors based out of UK, US, Singapore and Hong Kong next week.
Funds they are talking to include - The Master Trust Bank of Japan, Motion Fund, Morgan Stanley, HSBC Global, GIC, SBI MF, Reliance MF. The company has regulatory approval and the EGM is scheduled later this Friday to seek shareholders consent.
Puravankara spokesperson said, "At this juncture we are unable to comment, we are evaluating options. We will discuss our plans once they firm-up."
Under OFS, promoters auction existing shares to bring down holding in a company. The equity base of a company widens if fresh equity is issued and promoter holding falls in percentage terms. This way, promoters do not have to sell their stake if they choose the IPP route. IPP and OFS are among the two instruments introduced by regulator to help corporates increase their public float. More than 30 companies have already sold shares through OFS.
Among major real-estate companies, promoters of Godrej Properties choose IPP route to bring their holding below 75%. The company raised Rs 500 crore by issuing 8.2 million fresh shares.
DLF will sell nearly 81 million shares or 4.7% stake worth about Rs 2,000 crore through the IPP route. Next in line to take IPP route are promoters of Oberoi Realty, investment bankers say. Last month, Prestige Estates too sold share through IPP.
As per latest shareholding pattern, Puravankara promoters hold 89.96% stake in the company. The proceeds from the share sale would be used to reduce debt. Purvankara posted consolidated sales of Rs 832 crore and consolidated EBITDA of Rs 401 crore for 9 months ending December 31, 2012.
Investors in realty companies may keenly watch forthcoming RBI monetary policy, which will be revealed on March 19. RBI had cut its short-term lending rate, or repo rate, by 0.25% in January.
JOINING THE BANDWAGON
- Puravankara will be the third big realty firm to raise money through IPP
- Shares are expected to be sold in a price range of Rs 100-110
- Promoter in talks with Master Trust Bank of Japan, Motion Fund, Morgan Stanley, HSBC Global, GIC, SBI MF and Reliance MF
- Puravankara promoters hold 89.96 per cent stake in the company
