Pune-based regional real estate player Paranjape Schemes Construction Ltd is gearing up to file draft papers with capital market regulator SEBI for an IPO. The company is believed to be close to finalizing paperwork for the IPO which could see Paranjape Schemes raising INR600 crore to INR650 crore.
Citing three people aware of the development, a report in the Mint business daily states that the realtor is expected to offer 15% equity in the public issue. This dilution pattern works to an enterprise valuation of around INR4,000 crore.
A draft red herring prospectus (DRHP) could be filed with the market regulator by the first half of July. The IPO is likely to comprise fresh issue of shares while the funds will be used to invest in new projects and to repay debt.
Paranjape Schemes, which specializes into senior living and budget housing, will be the first reality company to get listed in India in nearly five years. The realty sector has been struggling over the last few years as a result of project delays and poor demand from end users. Meanwhile, highly leveraged balance sheets of major players have not helped the matters. Several players listed in 2010 such as DB Realty ([stock_quote symbol=”DBREALTY” show=”” zero=”#000000″ minus=”#FF0000″ plus=”#448800″ nolink=”1″]), Nitesh Estates ([stock_quote symbol=”NITESHEST” show=”” zero=”#000000″ minus=”#FF0000″ plus=”#448800″ nolink=”1″]), and Man Infraconstruction ([stock_quote symbol=”MANINFRA” show=”” zero=”#000000″ minus=”#FF0000″ plus=”#448800″ nolink=”1″]) are trading substantially lower than their issue price.
Although the stock markets have come to a point where fundamentals of realty companies are excessively discounted, it is far from a situation where companies with sound financial performance and decent IPO pricing would struggle. Paranjape Schemes’ unique positioning in the market as a niche player could help. According to data filed with Registrar of Companies (RoC), Paranjape Schemes’ top line grew from INR116.6 crore in FY 2012/13 to INR313.5 crore in FY 2013/14 while its long term borrowings reduced from INR214.5 crore to INR178.2 crore. In the same timeframe, it moved from a loss of INR10.3 crore to a profit of INR25 crore.