What do experts, brokerages say about Oberoi Realty IPO?

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What do experts, brokerages say about Oberoi Realty IPO?

Mumbai based Oberoi Realty's initial public offering of 395.62 lakh equity shares has opened for subscription today.

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Mumbai-based Oberoi Realty's initial public offering of 395.62 lakh equity shares opened for subscription today.

The real estate developer is focused on premium developments and on residential projects and aims to raise Rs 1,000 crore through the IPO.

The IPO has received commitment of Rs 185.15 crore from anchor investors as against allotment of 71,21,160 equity shares at Rs 260 a share, at higher end of price band of Rs 253-260 a share on Tuesday.

Morgan Stanley holds 10.76% stake in the company and currently it is a zero debt company.

Experts were mixed in their opinions while brokerage houses recommended subscribing the issue. Everyone agreed that the issue is highly priced. Investment Advisor, SP Tulsian feels that valuation of Oberoi Realty IPO is very expensive. However, Manish Bhatt of Prabhudas Lilladher has recommended subscribing the issue. "The issue looks good though it is slightly high priced," he said.

Brokerage houses like Edelweiss, Angel Broking and IIFL has advised subscribing the issue though the issue is fairly priced.

While explaining Tulsian said, "They have about 10 million sq ft ongoing projects, of which about 2 million sq ft has been sold by the company for close to about Rs 2,200 crore. So, they will be receiving huge amount from that because their Andheri East project of about 1.2-1.3 million sq ft is ready for handing over the possession in the month of December 2010, which the management has said in the RHP and confirmed that they are sticking to their delivery schedule. So, they will be having good cash flow coming. If I take total construction expenses on 8 million sq ft, as I said there are total 10 million sq ft, of ongoing projects of which you knock off this 1.5-2 million, you are left with 8 million sq ft. I don't think that you need Rs 1,000 crore money, on which are scheduled to be completed by 2013-14."

"If I take valuation call of Rs 8,500 crore, which company will be having the market cap with a land bank of close to about 20 million sq ft. And when you compare this maybe with DB Realty or HDIL who have larger presence in Bombay, I don't think that Rs 260 or maybe even the lower band deserves the kind of valuations. Because the DB Realty today is ruling at a market cap of close to Rs 10,000 crore, HDIL is ruling at a market cap of Rs 11,300 crore. I agree that they have certain debts in their books, but even the EV compared to Oberoi Realty is quite low, when you go with strict comparison."

CNBC-TV18's Managing Editor Udayan Mukherjee says the business looks pretty okay because most of their land banks seem to be around Mumbai suburban area and the rates are very strong out there, demand is pretty good. "A lot of institutional guys who want a large chunk of a Mumbai player will probably be interested in Oberoi Realty. It might be slightly on the expensive side, but the business is quiet robust, so there should not be a major problem."