All eyes are set on the Indian real estate industry as the sector may assume more vital roles in the coming days. The same reality was also corroborated by a veteran Indian banker, as per whom real estate sector could be the mainstay for the equity markets and on the other hand any debacle of a large initial public offering could set off a correction in the market. Are you guessing the person? He is none other than Indian tycoon Mr. Deepak Parekh, Chairman, HDFC Bank, who said, “If a large real estate IPO fails, it could have a serious repercussion on the market,” while speaking to newspersons on the sidelines of a private equity conference.
As indicated by the business icon, a large number of the recent IPOs have been overpriced and the markets are looking classy even in comparison to other emerging markets. “Companies raising money need to leave money on the table for investors,” he added.
Is this any admonition? We fail to confirm the statement in this way even though Indian realtors recently made a beeline to raise money through IPOs, with at least five major real estate companies are nodding. These are Emaar MGF Land, Lodha Developers, Sahara Prime City, Ambience Ltd and DB Realty – looking to raise over Rs 12,500 crore. Some analysts are terming the same approach as a sign of recklessness.
Among all these, Emaar MGF, planning to raise around Rs 3,850 crore, failed in getting its IPO fully subscribed last year. This development is said to have been the start of the IPO freeze in 2008. However a section of the investment banking community was smart enough to state that a failure of the likes of Emaar MGF in current market conditions will not have market reactions similar to those seen in 2008.
“Real estate IPOs will be looked at skeptically with low domestic investor interest,” a senior official from a global investment bank said. Are these premonitions? We, for the moment, fail to explain again.
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