1st of the series
Track2Realty Exclusive
Once a happy hunting ground, real estate sector has suddenly woken up to the reality that raising money through Initial Public Offerings (IPOs) is getting harder with investors being lot more discerning today. Track2Realty finds that realty companies have either deferred or cancelled their plans of what could have been collective fund raising of Rs.13,000 crore in the Indian market.
Make hay while the sun shines, goes an old saying. Well, the sun in the capital market was shining over the real estate sector till a few years back and many of the realty companies took a plunge. The oversubscription of many of the realty Initial Public Offerings (IPOs) till 2007 indicated a huge appetite of the Indians to shift from the traditional investment instruments to what was then seen as the sunrise sector. Such was the mad rush for raising money in the capital market that even the realty companies with limited presence in select micro market started launching projects across the country to showcase a pan-India presence.
The global financial turmoil and the stock market crash, however, taught a lesson to the new breed of investors that an asset class without any physical possession may not be the best investment instrument. As a result, while the investment portfolio of average Indians took a major shift from capital market, the real estate stocks could not remain unaffected. In fact, it took the worst beating with stock value of some realty companies even nose diving from Rs.560 to Rs.45. The dramatic turn in the fortune made the average investors stay out of the stock market volatility in general and realty stocks in particular.
It is not just the retail investors whose confidence in the realty stocks took a beating. As a matter of fact, investment bankers maintain that the institutional investors are also adopting a cautious approach when it comes to real estate. This crisis of confidence by the investors in the realty stocks has its own fallout. As per a report by SMC Global Securities, the bad mood of the capital market has led 22 companies, nearly a dozen realty one, to call off their IPOs during this fiscal. Even after getting approval from market regulator SEBI, these companies could not open their IPOs within the valid period of one year from the date of approval due to the ongoing turmoil in the capital market.
Lodha Developers’ Rs.2,500-crore IPO could not meet its opening deadline of January 20, 2011 and thus expired. The study by brokerage SMC Global Securities showed the list of companies that have cancelled or deferred their IPOs include some prominent names, such as Lodha Developers, Ambience Real Estate, Kumar Urban Developers, Lavasa Corporation, Neptune Developers, BPTP and Raheja Universal.
…to be continued
