Realty firm Lodha Developers Ltd is likely to reduce the size of its initial public offering (IPO) following lukewarm interest from investors, said three people aware of the development. In April, Lodha Developers had filed the draft IPO prospectus with Securities and Exchange Board of India (Sebi). According to the document, the company had planned to raise Rs3,750 crore in primary capital to lower its debt.
The promoters were also looking to sell a part of their stake, taking the total IPO size to around Rs5,000 crore, making it the biggest real estate public float since DLF’s Rs9,187 crore IPO in 2009.
“They went on extensive road shows, but did not get enough interest from investors on their pricing and valuation. They are now re-calibrating their strategy and are cutting down the size of the IPO to around Rs4,200 crore,” said one of the people cited above, requesting anonymity.
According to the second person, who also spoke on the condition of anonymity, the valuation expectation of the company has also taken a beating.
“When they first went out on the road shows they were looking at a Rs33,000-35,000 crore valuation. Now, they are considering a valuation of Rs 26,000-28,000 crore.”
“While the Sensex is scaling new highs every other day, things in the primary market are hardly moving. So any company wanting to launch a deal today will face these headwinds,” he added.
Lodha Developers declined to comment.
The company, however, is not the only issuer that is facing a hard time with its IPO.
On 10 August, Mint reported that at least 32 companies seeking to raise over Rs41,000 crore (approximately $6 billion) through initial public offerings are yet to hit the street, as volatility has hit company valuations.
Lodha Developers was founded in 1995 by Mangal Prabhat Lodha.
As on 31 December 2017, the realtor had 37 under-construction projects, of which 35 were in India, and two in London, according to the draft prospectus.
The projects account for a developable area of 33.8 million sq. ft, of which 31.95 million sq. ft account for projects in the Mumbai Metropolitan Region.
Bengaluru-based Shriram Properties Pvt. Ltd also plans to raise Rs1,000 crore from an IPO, managing director M. Murali had told Mint in April. Another Mumbai-based developer, Puranik Builders Pvt. Ltd, has filed its draft prospectus for a Rs1,000-crore initial share sale.
Last month, The Economic Times reported that India’s largest renewable energy company ReNew Power Ventures is likely to defer its IPO after investors demonstrated lukewarm interest in the aggressive valuation the company was proposing.
In June, Mint reported that the IPOs of several sea food exporters were facing uncertainty due to sharp correction in the pricing of listed peers. Several seafood exporters such as Devi Sea Foods Ltd, Nekkanti Sea Foods Ltd and Sandhya Marines Ltd have filed their draft IPO documents with the regulator and are looking to collectively raise around Rs2,100-2,200 crore.
This article was first published on livemint.com