Minimum public float: How realty cos are coping with it

Sebi's June 30 deadline is looming large for companies to meet the minimum 25 percent public float norm. So, over the next few weeks, a slew of real estate companies and their promoters will tap the equity markets.

These include among others DLF that will issue fresh equity of 8.1 crore shares and hopes to raise almost Rs 2000 crore if you go by the current market price. Jaypee Infratech will have to dilute 8.3 percent which works out to be nearly Rs 370 crore. Puravankara has to dilute by almost 15 percent for around Rs 300 crore and Omaxe has to sell nearly 14.14 percent and hopes to raise Rs 370 crore from that exercise.

By October, promoters of the zero leveraged Oberoi Realty will have to pare their stake by around 2.5 percent. What will be interesting to see is if institutional investors have such a big appetite for real estate considering foreign institutional investor (FIIs) for some time now have been wary of the sector.

In the midst of all this, Godrej Properties has announced a rights issue of upto Rs 700 crore to meet its growth capital requirements. The company plans to launch the rights issue in the second quarter of this fiscal and will take a call on pricing at a later date.

With debt of under Rs 1500 crore and a debt equity ratio of 1:1 Godrej Properties says the rights issue is mainly to build upon its expansion plans. The realty firm is hoping to launch 15-20 projects this fiscal as against the eight it had added to its portfolio in FY13. But with so many real estate issues hitting the street, how confident is Godrej Properties of its rights issue being successful?

Pirojsha Godrej, MD & CEO, Godrej Properties says, "I don’t think we would have proceeded unless we felt we were very confident and we could get it done. At the same time we have just announced this that we are yet to engage with our investors. Also, one of the reasons we have selected a rights issue is that we don’t want to dilute the promoter stakeholding at all through the fundraising exercise. We think current valuations of the company are not at all attractive for us to dilute ourselves at these valuations. With the promoter holding being 75 percent of the capital we raised from this rights issue is expected to be infused by the promoters themselves. So, we see a good opportunity to invest capital at these valuations, we see a good opportunity to grow the scale of the company and use these funds very productively. So, we are reasonably confident of the success of the rights issue but again that remains to be seen as we go out and have these discussions with our investors."

Godrej adds, "The reason from a strategic point of view to do it is that we feel we need more capital to fund our ongoing growth. We have seen great success in the market in terms of adding new projects. We have added about 10 new projects in the last 13 months or so and we see good visibility on being able to sustain that performance going forward and for that we feel it makes sense to raise this capital. It will allow us to strengthen our balance sheet and give us the platform we need. Exactly how it will be apportioned is something we will have to clarify."