Indiabulls Real Estate latest developer to tap QIP route

The real estate arm of the Indiabulls group of companies has announced plans to raise money through a share sale, becoming the third real estate developer to raise money through this route in recent weeks.

Equity issue: An Indiabulls office in Mumbai. The company has informed BSE that its shareholders have approved the stock sale. Prashanth Vishwanathan / BloombergWhile the company didn’t specify what the funds would be used for, an analyst said it could be for its power business.
Indiabulls Real Estate Ltd, India’s fourth largest real estate developer by market value, plans to raise up to $600 million (around Rs2,900 crore) through a qualified institutional placement (QIP), the company said in a statement to the Bombay Stock Exchange (BSE) on Monday. The QIP, or sale of shares to investors such as banks and financial institutions, opened on Monday.
Indiabulls told BSE that the company’s shareholders have approved the QIP issue. The company didn’t disclose details of the number of shares it plans to sell or the price at which it would do so.
Morgan Stanley is lead manager to the issue. The allotment of the shares will be made around Friday, according to the draft prospectus submitted by the company, and which can be seen on the National Stock Exchange’s website.
This is the third instance of a real estate company raising funds through an equity issue in recent times.
On 16 April, Unitech Ltd, India’s second largest developer by market value, managed to raise as much as $325 million in a QIP to repay debt and fund projects.
Last week, DLF Ltd, India’s largest developer by market value, said its promoters had sold a 9.9% stake in the company for Rs3,860 crore, to raise money to buy out hedge fund DE Shaw and Co. LP’s investment in DLF Assets Ltd, also promoted by them, and to infuse fresh capital into this company.
“I think more such issues are likely,” Vedika Bhandarkar, managing director and head of investment banking, JPMorgan, had said at the time of DLF’s share sale. “When the volatility was very high, investors were unwilling to put their money to work. Now, that has changed. They are willing to put money if they understand it is good for the company. Investors are focused on large stocks.”
An analyst said Indiabulls would use the proceeds of the QIP to fund its power projects in Maharashtra and Chhattisgarh.
Indiabulls Real Estate has a 71% stake in the group’s power business.
“The company, according to is draft prospectus, has only around Rs1,000 crore of debt. So it does not look likely that it is raising funds to repay debt like most real estate developers are doing,” an analyst with a domestic brokerage firm who did not want to be identified said. “I think even this debt was taken for their power business and not their real estate business.”
Indiabulls’ officials were not available for comment on Monday.
Indiabulls plans to develop power plants in Amravati and Nashik in Maharashtra and Bhaiyathan in Chhattisgarh.
In February 2008, Indiabulls Power Services raised Rs1,600 crore from steel czar L.N. Mittal and hedge fund Farallon Capital Management, through the sale of a 37.5% stake.
Shares of Indiabulls Real Estate soared 38.51% to close at Rs205 per share on the Bombay Stock Exchange, in the few seconds for which trading was allowed on Monday before being suspended for the day because the exchange’s benchmark index breached the upper circuit level.
The Sensex ended the day 17.34% up and the BSE Realty Index, up 23.45%.