Nexus Select Trust REIT (real-estate investment trust) is expected to debut on the bourses with a single-digit premium on May 19, given the healthy response to its initial public offering (IPO) last week, robust business model, diversified and high-quality asset base, and attractive valuations.
This would be the first retail-focused REIT to be listed on the BSE and the NSE. In the past, there were three listings from the REIT space - Embassy Office Parks, Mindspace Business Parks, and Brookfield India Real Estate Trust - which all are business or office-focused REITs.
The owner of India’s leading consumption centre platform of high-quality assets, which serves as essential consumption infrastructure for India’s growing middle class, has received a healthy response from investors to its Rs 3,200-crore IPO.
The offer has garnered bids for more than 101 crore units against the IPO size of 18.52 crore units, subscribing 5.45 times during May 9-11, with a healthy response from all kinds of investors. We have seen 4.81 times subscription from institutional investors, and non-institutional investors have bought 6.23 times the allotted quota.
The IPO by the Blackstone-backed REIT comprises a fresh issuance of units worth Rs 1,400 crore and an offer for sale worth Rs 1,800 crore by selling unit holders.
"The overwhelming response of more than five times, in an extremely volatile market, is a great success to India's first retail assets-led REIT," Prashanth Tapse, Senior VP Research at Mehta Equities, said.
He feels the grey market demand hints at a decent listing of around 4-5 percent on the issue price of Rs 100. Post listing, the counter may get higher volume demand due to the lower allotment ratio in the entire IPO investor category, he said.
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Grey market performance
REIT/InvIT industry is at a nascent stage and continuously evolving in India. It gives the opportunity to own top-quality income-generating real-estate assets and decent returns, he believes.
In the grey market, Nexus Select Trust REIT traded with a 3-5 percent premium over the issue price, analysts said. The grey market is an unofficial trading platform for IPO shares/units, which is generally considered by investors to know the expected listing price.
What brokerages say
Following a healthy response to the Nexus Select Trust IPO, Swapnil Shah, Director, Research, Stoxbox, also expects the issue to list at a premium on Friday.
Stoxbox had given a ‘subscribe’ rating for the long-term rating to the IPO as the company’s portfolio offers an attractive opportunity to capitalise on India’s consumption growth through a robust business model and diversified asset base that can serve as a natural hedge against inflation.
Moreover, "considering the three listed office REITs, Nexus Select Trust offers a differentiated exposure to investors due to its retail assets," Shah said.
Nexus Select Trust’s portfolio comprises 17 best-in-class Grade A urban consumption centres, with a total leasable area of 9.2 msf (million square feet), two complementary hotel assets (354 keys), and three office assets (1.3 msf) as of December 2022.
The quality, scale, and reach of its pan-India portfolio, the superior shopping experience, and holistic retail offering have enabled it to achieve a market-leading position, which makes most of their portfolio assets destinations of choice for leading brands that are looking to expand in India, Shah said.
As a result, Nexus REIT enjoyed a 96.2 percent average committed occupancy across their portfolio as of December 2022, and 11 percent CAGR in tenant sales from FY18 to FY20. The NAV per unit, as of December 2022, stood at Rs 127.73.
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