Brokers say apply for Omaxe; IPO subscribed fully

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Omaxe, a real estate player, is open for subscription with a public issue of 1.78 crore equity shares of Rs 10 each with an additional green shoe option of upto 17.50 lakh equity shares in the band of Rs 265 to Rs 310 per share. The issue will close for subscription on July 20, 2007.

Public issue has subscribed 1.32 times. A 97.6% bids of total are at Rs 310 per share.

Qualified institutional investors, (QIBs) portion subscribed fully on day one.

All brokerages have come out with reports on Omaxe IPO, they advised investors to subscribe the issue.

First Global report says, "Looking at the price band of Rs 265-310, Omaxe is available at a FY07 P/E band of 18-21, as against a FY07 P/E of 53.6 for DLF, 35.1 for Unitech, 42.4 for Sobha and 23.9 for Parsvnath."

"The overall picture appears bright for Omaxe and its IPO, which is quite reasonably priced, is likely to prove rewarding for investors. We recommend 'Subscribe' on the Omaxe IPO."

Edelweiss Securities says, "We have valued the company on NPV basis. NAV estimate is INR 400-405. This represents a 51%-31% upside over the IPO price of INR 265-310 respectively. We have discounted the cash flows at a WACC of 15% over a period of four years."

"Government of India's (GoI's) increased thrust on improving the infrastructure and economic development in Tier 2 and Tier 3 cities is likely to provide Omaxe a big growth opportunity, going forward. We believe the company will be able to make the best of this growth opportunity, given its proven execution capabilities. We recommend 'Subscribe' to the IPO.

SSKI India says, "We have valued Omaxe using the NAV method, by discounting the equity flows from all its projects at a 15% discount rate. We have assumed a development cycle of about 8 years for the company's current land bank and have not given any value for future land bank additions. Based on the above, our fair value estimate of Omaxe's NAV comes to Rs 448/share, which gives a 44% upside from the upper band of the price range of Rs 265-310/share."

"We believe, Omaxe, with its established brand name, focus on quality construction and strong execution skills, is well placed to benefit from the rising demand for residential and commercial real estate in India. Moreover, we believe the company's strengths mentioned above would ensure strong realisations for all properties, resulting in sustained growth in revenues, profitability and earnings in the future. We recommend to Subscribe to the issue."

The company has a land bank of over 3,000 acres and at present 47 projects are under development.

The issue would constitute 11.20 per cent of the fully diluted post-issue paid-up capital of the company, if the green shoe option is exercised and 10.30 per cent, if the option is not exercised.

Of the total equity float, up to 1.75 crore equity shares are for the public, while the balance 2.96 lakh shares are reserved for eligible employees of the company. Additionally, there would be a green shoe option of 17.5 lakh equity shares.

Omaxe has appointed DSP Merrill Lynch Ltd, Citigroup Global Markets India and UBS Securities India as global coordinators and joint book running lead managers for the issue. JM Morgan Stanley is the book running lead manager.