Updated: February 3, 2021 10:15:55 pm
The initial public offering (IPO) of Investment firm Brookfield India’s Real Estate Investment Trust (REIT) opened for subscription earlier today. So far, the issue was subscribed 15.09 per cent by the end of the first day of bidding.
It received a demand for 1,15,12,600 shares across both the stock exchanges against 7,62,78,200 shares on offer, data from NSE showed.
The Brookfield REIT will be available for subscription till Friday, February 5, 2021, and the price band of the public commercial real estate vehicle has been fixed at Rs 274-275 per share. The public issue is expected to fetch up to Rs 3,800 crore.
Investors who wish to subscribe to Brookfield REIT IPO can bid in a lot of 200 units and 200 units thereafter. At the upper price band, they will be shelling out Rs 55,000 to get a single lot of Brookfield REIT. The shares will be listed on both BSE as well as the National Stock Exchange (NSE).
This will be the fifth IPO in 2021, after Indian Railway Finance Corporation (IRFC), Indigo Paints, Home First Finance Company and Stove Kraft.
Brookfield REIT will be the third listed trust in India if it is successfully subscribed. The first one Embassy Office Parks REIT, backed by Blackstone and Embassy group, got listed in April 2019 after raising Rs 4,750 crore. Mindspace Business Parks REIT, owned by K Raheja and Blackstone, was listed in August last year amid COVID-19 pandemic after raising Rs 4,500 crore.
The Brookfield REIT issue can be applied through ASBA only.
Before heading into the IPO, the Brookfield REIT raised Rs 1,710 crore from anchor investors on Tuesday. In a regulatory filing, Brookfield REIT informed that under anchor investors portion in the public issue 62,180,800 units have been subscribed at a bid price of Rs 275 per unit. This amounts to about Rs 1,710 crore.
The global coordinators and book running lead managers to the Brookfield REIT issue are Morgan Stanley India Company, BofA Securities India, Citigroup Global Markets India and HSBC Securities and Capital Markets (India).
Domestic book running lead managers of the issue are Ambit, Axis Capital, IIFL Securities, JM Financial, JP Morgan India, Kotak Mahindra Capital Company and SBI Capital Markets.
Link Intime India is the registrar to the issue.
The net proceeds from the issue will be utilised for partial or full pre-payment or scheduled repayment of the existing debt of Asset SPVs (special purpose vehicles).
Brookfield REIT, the country’s only 100 per cent institutionally managed public commercial real estate vehicle. It is offering 14 million square feet of its commercial portfolio in the REIT.
REIT, a popular instrument globally, was introduced in India a few years ago, aimed at attracting investment in the real estate sector by monetising rent-yielding assets. It helps unlock the massive value of real estate assets and enable retail participation.
“Brookfield REITs offering is a great indicator of the strong future that commercial real estate has in India. After the successful listing of Embassy and Mindspace REITs, this rides high on the long -term investor confidence. REITs will help raise capital and improve the fund flows into the sector as well as allow greater participation from retail investors in the asset class. The commercial office space segment has been growing from strength to strength over the past few years with sustained growth in rentals across prime business districts. We expect this momentum to regain in the near future which would encourage more participants to enter the REITs market,” said Tushar Rane, Executive Director – Capital Markets (Core Assets) at Knight Frank India.
Reliance Securities in its IPO note has recommended a “Subscribe” to the offer while Angel Broking has given a “Neutral” rating.
“Notably, REITs must be looked at cash flow perspective and BIRET generated cumulatively Rs 11.4 bn FCF through FY18-1HFY21. Given substantial reduction in debt level after fund raising, we expect saving on finance cost should aid the company to generate positive net distributable cash flows (NDCF) from FY22E onwards. However, the NAV per unit as on 1HFY21 is estimated at Rs 311 (13 per cent premium from issue price). Further, the company expects NDCF to the tune of Rs 6.6 bn and Rs 7 bn in FY22E and FY23E, respectively which offer yield of ~8 per cent. Hence, we recommend SUBSCRIBE from long-term perspective,” Reliance Securities said in its research note.
Angel Broking in its report said, “Though the REIT has incurred losses in FY20 and has not paid out any dividends, they expect to pay a yield of 7.5% in FY23 which we believe is aggressive and may be difficult to acheive. Post the IPO there will also be a debt reduction of ~ ₹3,575 crore for the company which will bring down the overall debt. However due to the current uncertainties around Covid-19 and proliferation of work from home we expect that demand for commercial real estate to be muted. Given the uncertainties, weak financials and high debt on book we would recommend a “Neutral” rating on the issue.”
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