Will real estate IPOs get good response from investors?

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Will real estate IPOs get good response from investors?

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.

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Q: Considering how hot this space is at this point, do you think most of these issues warrant being priced at a premium as well?

Subramanium: What is being hot is not fully understood because at the end of the day real estate as a sector is completely under represented in the Indian Capital markets, forget the Index, even the Indian capital market itself.

If you take any large economy in the world at any place, you will find real estate as a significant part of the market capitalization and that is missing in India. And you will find the response not just to Parsvnath but also the immediately following offerings, as long as they are priced appropriately, one will find that the response will be exceedingly good. Premium or discount is to benchmark and the benchmark is what Parsvnath is trying to set.

Q: What is the next big issue you are involved with?

Mehtra: The next big issue, which we are involved with, is Cairn Energy, which we are hopeful. It will be a pre-Christmas kind of deal. The size of transaction would be large, as you would have read in various newspapers. It is approximately a USD 1.5 billion kind of offering.

Q: What else other than Cairn?

Mehra: There are lots of them but the one, which is eminent, is Cairn Energy. Apart from that, there are lots of them. We will see a flurry in the capital market. I am personally very bullish. The year '06-'07 is going to be a bigger and better year than previous ones and '07-'08 is going to be bigger and better than what we could have imagined in our wildest dream.

I know for sure that there are lots of corporate activities happening. Lot of them are talking to us and we would see serious amount of fund raising in Indian capital markets, which we would have never imagined. Markets are supportive, people are supportive, corporates are showing the performance and this is the right time to raise capital.

Q: When is the next real estate issue likely to hit the market and what kind of a ballpark market cap is that seeking to come out?

Subramanium: I think today is the official launch for Sobha issue. There is a press conference at 12:30. I don't want suspense to take away before that but it will be a large issue in terms of a market cap. The market cap for the company and the IPO pricing is in the region of a billion dollars, both at the bottom end and the top end.

Q: What are the next few issues you are involved in at Enam?

Subramanium: Over the next few months, we have filed applications for several issues and they should be coming through in the next few months. We are waiting for regulatory clearances and there are at least two real estate ones and wide variety of sectors.

At the end of the day, the markets are very receptive, the corporations are doing well and a whole host of new sectors are coming to the market and investors are willing to get involved and get invested in all of these new sectors, that is the kind of market we would want to see going forward.