Indian IPO

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Wednesday, October 04, 2006

HSBC forecasts 50 property IPOs next year

India will have at least 50 property-related initial public offerings, IPO in the next year as the real-estate industry booms, said Anish Jhaveri, HSBC Holdings’ head of equity sales in Asia’s second most populous country, reports The Financial Express.

“With the opening of the real-estate sector, there is a lot of need for funds,” Jhaveri said. “The government has been giving very proactive support to the whole sector.”

The real-estate market in India is worth about USD 12 billion and is growing at about 30% a year, Ernst & Young said in a September 21 report commissioned by the Federation of Indian Chambers of Commerce and Industry. Rising incomes, easy financing and population growth are driving demand for housing in India, a nation of 1.1 billion people, and luring overseas investors.

“The appetite for real-estate IPOs will be there,” KK Mital, chief investment officer at Escorts Asset Management in New Delhi said. “The young workforce is looking for real-estate investment, and the financing is available - the banking system is supporting this growth.”

Jhaveri said venture capitalists and overseas investors are poised to invest over USD 5 billion in India’s real-estate sector, without providing more details. “People are seeking more clarity” on possible changes to property regulations before investing, he said.

His forecast takes into account the possibility that India may allow real-estate investment trusts, or REITs, to invest in the nation’s property industry. Still, of the 50 real estate related IPOs that he predicts will take place in the next year, only a ‘small’ number will be REITs, he said.

In the past year, India had eight initial share offerings by engineering and construction companies, which raised USD 478 million, according to Bloomberg data. That compares with the six IPOs raising USD 304 million in the previous 12-month period.

Indian billionaire Kushal Pal Singh’s real-estate company, DLF Universal, is seeking to revive the nation’s biggest share sale after regulators decide on a complaint by shareholders. The New Delhi-based company plans to submit offer documents to regulators, paving the way for an IPO by early December, Saurabh Chawla, the company’s finance vice president, said.

The developer, which was publicly traded until 2003, withdrew its IPO in August after a group of minority investors claimed they missed the chance to increase their stakes when DLF sold convertible bonds without notifying all shareholders.

Indian real-estate companies “have a better chance of getting listed” than those in other industries, analysts Manishi Raychaudhuri, Suhas Rema Harinarayanan and Anand Agarwal wrote in a September 28 UBS AG report.

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