China Resources Land and Indiabulls Real Estate were both in the market last night in an attempt to raise new capital on the back of strong share price recoveries and investors did not disappoint. Both deals attracted strong demand and were significantly upsized, allowing CR Land to raise HK$4.3 billion ($555 million) and Indiabulls to walk away with Rs26.8 billion ($545 million), making them the two largest equity capital raisings in Asia this year, aside from the rights issues.
China-based CR Land initially offered 230 million shares at a price between HK$14.04 and HK$14.34 through a top-up placement. The price represented a discount of 6.0% to 8.0% versus yesterday's close of HK$15.26 and the initial size would have allowed the company to raise a maximum of $425 million. But thanks to the good interest from investors who saw a chance to buy into one of the top players in China's property sector as the market turns around, the deal was increased by 30% to 300 million shares and was also priced at the top.
To be sure, CR Land's share price has already had a strong run over the past 2.5 months -- up 90% -- and yesterday's close represented a new 52-week high. However, analysts are anticipating more asset injections from its parent company, which is sitting on a land bank of more than 4 million square feet, and if that happens, it could easily spur further share price gains. Indeed, the term sheet said the money raised from the placement will be used for further land acquisitions as well as for general working capital.
But even without further injections there should be room for improvement as CR Land is currently trading at a discount of close to 20% versus its net asset value. This compares with a 25% premium for China Overseas Land & Investment, which is currently the only Hong Kong-listed Chinese property play with a larger market capitalisation. Of the 22 analysts who cover the stock, according to Bloomberg, 17 have a "buy" recommendation on it. Only three analysts advise clients to "sell".
One source noted that CR Land is also quite a liquid stock, which made people comfortable to put in decent size orders. The order book was said to have attracted about 100 investors, primarily long-only accounts and hedge funds.
The deal, which was arranged by Credit Suisse, accounted for 6.4% of the existing share capital and about 17 trading days, based on the average daily trading volume over the past three months.
Meanwhile, Indian property developer Indiabulls launched a qualified institutional placement (QIP) on the back of a 38.5% gain in the share price earlier in the day. The stock was propelled higher by the euphoria that swept Indian financial markets on the back of a stellar election result by the Congress Party-led coalition that will see prime minister Manmohan Singh returned for a second term. The benchmark Bombay Sensex index triggered a circuit breaker shortly after opening, which caused trading to be halted for two hours, but still managed to rally 17.2% before trading was halted for a second time -- this time for the rest of the session to allow investors to cool off properly.
The company launched the QIP at a fixed price of Rs185 per share, which represented a discount of 9.8% versus the last traded price of Rs205. However, it represented a 25% premium to last Friday's close.
Investors were undeterred, however, and the deal was quickly upsized by some 48% from the initial 98 million shares, which would have allowed the company to raise about $375 million, to 145 million shares. The size of the order book wasn't known last night, but one source said the Reg-S deal attracted a lot of interest both from Asia and Europe, as well as from domestic Indian investors and a couple of offshore US accounts.
Earlier in the day, Indiabulls' shareholders approved a plan to raise as much as $600 million from the sale of securities to fund the expansion of new projects or acquisitions.
Morgan Stanley was the sole bookrunner for the transaction.