Realty firms plan to raise over Rs 25,000 cr by share sale

[B. Karthick]

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.

B.Karthick
Research Analyst.