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Indian Property Firms are In IPO Rush

Published & Updated as on - 2010-02-18


MUMBAI—India is bracing itself for a wave of initial public offerings that will raise almost $5 billion over the next six months, but some investors say not all deals will be taken up, and some may even be shelved or scaled back in size.
Investors are becoming increasingly choosy about quality, valuations and focus after the financial crisis battered confidence last year, say bankers and analysts. The recent performance of new debuts such as power company Indiabulls Power Ltd., which is down 26% from its IPO price since listing last month, have added to the caution.
"Indian real estate companies are collectively looking to raise $4.5 billion of equity...however, that all won't get raised," said S. Sriniwasan, chief executive of Kotak Realty Funds Group.
Godrej Properties, Lodha Developers, and Emaar MGF Land are among a group of real estate companies that are currently seeking to raise a total of $2.87 billion from IPOs, according to documents filed with the stock exchange.
So far this year, Indian companies have raised $3.18 billion from IPOs, according to Prime Database. Along with the Chinese property companies that flooded Hong Kong's IPO markets recently, investors in India have become picky and valuations are key, say fund managers.
High valuations didn't dissuade investors from buying into property IPOs a couple of years ago, when market leader DLF Ltd., raised $2.25 billion in its IPO in June 2007, in one of the biggest IPOs in India.
Property deals should be priced at a discount to DLF, analysts said, meaning that pricing should be around 10.3 times to 12.5 times forward earnings, a 10 to 15% discount to DLF, which is trading at 14.8 times forward earnings.
Hot picks for investors, say analysts, are companies that have land banks located within city limits in India's seven biggest cities: Mumbai, New Delhi, Kolkata, Bangalore, Chennai, Hyderabad and Pune.

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