Real estate stocks are doing very well this morning partly because of the rub-off of the huge over-subscription of the Parsvnath issue. S Subramanium Head of Investment Banking at Enam and Atul Mehra ED and Head of Capital Markets at JM Morgan Stanley comment on the recent real estate IPOs.

S Subramanium opines that other real estate IPOs will definitely see significant response from investors and that Parsvnath Developers definitely has paved the way for that.

Atul Mehra ED and Head of Capital Markets at JM Morgan Stanley believes that markets are supportive, people are supportive, corporates are showing the performance and hence, this is the right time to raise capital.

Excerpts from CNBC-TV18's exclusive interview with Atul Mehra and S Subramanium :

Q: Is Parsvnath Developers inline to raise some more capital after this IPO, are they heading for that?

Mehra: It is difficult to answer that at this point of time. They just concluded an offering over the weekend. Let them first complete the process of this issue and we will discuss with the management what next and where do we go from here. At this point of time, I can only talk this much.

Q: Are you privy to any information because this kind of a road map is decided well in advance between the bankers and the management; are they in line to do a placement right after the issue?

Subramanium: As you know, there is a disclosure in the draft prospectus, which the company says that at the time of filing the prospectus, there was no plan of raising another issue. So if there are any plans, which will happen, then it will happen after that. So on the date of filing of the prospectus, there were no such plans.

Q: Walk us through how have you priced this IPO and how it compares to its listed peers?

Subramanium: Very simple, when you have every bit of the book coming in at the top end; when I say every bit i.e more than 99% of the total demand, has been coming in at the top end of the band. One can see that it is difficult for any one of us to look at pricing it at anything significantly below the top-end.

The demand has come in at the top-end right from retail, institutional, as well as the non-institutional book. Every single part of the book has been over subscribed at that particular price band. Therefore, it has become an easy job for us, as book runners, to recommend to the company and the company to take a call on the pricing.

Q: Post-listing, will there be more clarity in terms of land bank details of Parsvnath?

Mehra: Once we are out of the lock up issues and the blackout period, certainly the management can then talk a lot more freely. I am sure they will have some good news to share with the investors. Let's keep our fingers crossed, let’s keep our mouths mum till the whole process of IPO gets completed.

Some of the highlights are that, not only is this the largest real estate IPO at this point of time that has received an overwhelming response, what is important and interesting to understand is that this IPO has received a response of approximately USD 13 billion on an overall basis.

This makes it the third largest subscription ever received in the history of Indian capital markets, after Reliance Petroleum's mega IPO response and NTPC, which happened almost 2 years back. Every bucket of investor participated in a very overwhelming manner.

If you break it up, we had 6 largest ever subscription being received in the HNI category. We have the fifth largest ever retail response in any IPO in India and we received approximately 5,80,000 odd applications, which makes it the 7 largest ever retail response in any IPO.

This goes to show that this IPO was very well received in the IPO market. 99.9% of the book was at the top end of the range and therefore we recommended to the management a price of Rs 300, which they accepted.

Q: Could you give us some more detail about the QIB portion of the book, which all institutions actually bid for 10% of the issue and who were the top 5?

Mehra: I cannot share with you for regulatory reasons because that is not publicly known. But I can share with you that the QIB bucket was oversubscribed approximately 74 odd times.

It is common intelligence to presume that there were huge number of FIIs and domestic institutions, which participated. It is unfair to name a few of them but I can still tell you that the response was overwhelming. You think of the five top names and I am sure you would be 80% right.

Q: Now with this issue, out of the way, does it pave the way for DLF to come-in, in the next couple of months? Do you think it sets a benchmark to what is acceptable valuation range for the larger institutional investors in the real estate space?

Subramanium: Yes, this particular offering has definitely paved the way for other IPOs from the real estate sector. DLF will be coming in but even before DLF, we are bringing in Sobha Developers to the market and other real estate IPOs will definitely see significant response from investors and Parsvnath definitely has paved the way for that.

The other issue is that this is the first real estate IPO in the market and the first one sets up the tone and the pace. The matrix for valuation will be decided over the period of time but this sets the tone.

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