Bankers court Lodha for Rs 2,500-crore IPO

Though not many realty IPOs have come to the market in recent years, investment bankers say there is appetite among investors for big and high-growth firms.

Four years after dropping its plan to go public, Lodha Group, the country’s largest real estate developer by sales, is reviving the idea of launching an initial public offering of equity.

According to reports and bankers, the firm is vetting proposals from investment bankers for the IPO mandate, and would give it to at least four of the latter.

Lodha, currently building the country’s tallest residential tower, is aiming to raise between Rs 2,500 crore (Rs 25 billion) and Rs 3,000 crore (Rs 30 billion) through the IPO.

This is similar to what it had sought to do in 2010.

“We do not react to market speculation.

"At this stage, we have no comment on the matter,” a Lodha spokesperson said in a reply to a query by Business Standard.

Sources said the buoyancy in the primary market this year and the ‘top realty developer’ tag had prompted Lodha’s IPO plan.

The firm’s promoter is Bharatiya Janata Party legislator Mangal Prabhat Lodha. Earlier this year, it overtook Delhi-based DLF as the country’s largest realtor in revenues.

Lodha’s sales were Rs 7,800 crore (Rs 78 billion) in 2014-15, compared to DLF’s Rs 7,648 crore (Rs 76.48 billion).

For this financial year, Lodha’s sales target is Rs 10,000 crore (Rs 100 billion) and deliveries 7,000 units.

Following the separation within the group, elder brother Abhisheck Lodha got the flagship real estate business.

The younger sibling, Abhinandan Lodha, set up a financial services company.

The revival in Mumbai's property market could help the group, which predominantly has projects in the island city and its suburbs.

According to property consultant Jones Lang LaSalle, home sales in Mumbai have risen 28 per cent  between the fourth quarter of calendar year 2014 and the third quarter of 2015.

Though not many realty IPOs have come to the market in recent years, investment bankers say there is appetite among investors for big and high-growth firms.

While 18 firms -- from as diverse areas as infrastructure to media -- have come to the primary market to raise money through IPOs this year, real estate has stayed away.

Only Paranjape Schemes Construction has filed a draft offer document with the Securities and Exchange Board of India.

“The market is perceived to be hostile for real estate IPOs. However, a big brand name like Lodha, with a decent track record, should see demand from institutional investors,” said the investment banker quoted earlier.

In a recent interview with this paper, Sharad Mittal, head and director, real estate funds, at brokerage Motilal Oswal, had said the primary market was not ready for real estate IPOs.

“There are actual and perceived issues about these companies, which has impacted investor sentiment.

"The under-performance of market leaders has also made it unsuitable for new players to come and raise funds through IPOs,” he’d said.

Image: Abhisheck Lodha. Photograph: Courtesy, Lodha group.