The issue, which could total as much as $400 million if the 11.1% greenshoe is exercised, marks the first international capital raising by an Indian real estate company and comes at a time when there has been a strong focus on the sector following DLFÆs initial public offering.
DLF attracted solid demand for its $2.25 billion IPO and established a new valuation benchmark for the sector. The stock is due to start trading today (July 5).
The popularity of the DLF deal has likely contributed to the positive response received by Indiabulls, which increased its original GDR target of $200 million part way through the bookbuilding process.
According to sources, the deal attracted about $1 billion worth of orders and around 30 institutional investors who were keen for yet another chance to buy into the Indian real estate market. While the company is relatively new to the market, its management is well-regarded and has a track record of value creation through its other businesses which include securities trading, consumer finance and mortgage lending.
Indiabulls Real Estate also has a high quality land bank and its projects, which range from high-end office and commercial spaces, premium residential developments and integrated townships to luxury resorts and special economic zones, cover an area of more than 10,000 acres.
The price was fixed at $10.32 per GDR, which translated into a 4.1% discount to TuesdayÆs Mumbai close of Rs435. The local shares gained 4.3% on the day of the pricing, however, and based on the five-day average close, the discount was only 2.3%.
The company could have fixed the price at an even tighter discount, according to one source, but preferred to show some goodwill towards its investors, given that this was its first time in the market. The developer issued no new shares when it went public earlier this year and sold no existing shares either. Instead, it chose to list only the shares held by its existing shareholders and save the fund raising for later, i.e. now.
About two-thirds of the investors who bought into this first deal were new investors, while some existing shareholders also took the chance to increase their investments. Some 40% of the demand came from US investors, with Asian accounts contributing 35% and European-based investors taking the remaining 25%.
The source described the order book as ôhigh qualityö with a mixture of long-only funds, hedge funds and property specialist investors.
The share price continued to gain yesterday in the wake of the sale, adding another 4.1% to a record close of Rs452.95. The GDR issue was priced late Tuesday night.
The company sold approximately 34.88 million GDRs, which each account for one common share, and may sell another 3.88 million units if the greenshoe is utilised. The shares backing the GDRs were all new.
Merrill Lynch was the sole arranger for this offering, which marked the largest sole bookrun deal from India ever, exceeding last monthÆs $240 million qualified institutional placement for insurance and healthcare provider Max India, which was led by CLSA.
This has been a busy month for Merrill in India with four deals in short succession, including a $4.3 billion combined ADR and domestic offering for ICICI bank, the $2.25 billion IPO for DLF, and mining company Sterlite IndustriesÆ $1.75 billion ADR. The US investment bank is also mandated as a joint bookrunner for HDFC BankÆs upcoming follow-on.
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