Builders to take IPP route to comply with Sebi norms
With increasing debt and low sales months after months, the real estate companies have thought of going to the Institutional Placement Programme (IPP) to sell the shares to the investors.
This IPP route will be taken by the builders as against the Offer For Sale (OFS) way to comply with the Sebi norms of public shareholding which is 25%. This will be done by June 13, 2013.
Out of nine renowned companies, three have decided to issue shares to institutional investors before the deadline. They are DLF, Prestige Estate and Puravankara Projects.
Oberoi Realty is also deciding about the IPP mode to reduce its promoter’s stakes. Furthermore, JP Morgan has been appointed by Puravankara Projects to take care of 4.5 crore shares to be sold to institutional investors. The promoters own 90% stake in the Bangalore-based developer.
Rising debt and slowing sales have been the key factors for this change and selling shares in the secondary market has been becoming difficult all this while.
However, as per Prabhudas Lilladher Capital Markets, this institution placement method is a better option than any other as funds collected through fresh issue of equity could help these companies to reduce their debt.
To increase revenue, companies have other routes as well like issue of bonus shares or rights issues to non-promoters. Now, the real estate companies prefer IPP model as with OFS model it becomes difficult to sell shares in the secondary market because of weak interest in realty stocks.
As per IPP route, the real estate groups can sanction shares of up to 10% of their equity revenue to institutional investor while in the OFS model, promoters can sell their shares to any investors through stock exchange.
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DLF, Institutional Placement Programme, IPP, IPP route, JP Morgan, Mumbai, Oberoi Realty, Offer For Sale, OFS, Prabhudas Lilladher Capital Markets, Prestige Estate, Puravankara Projects, SEBI, Sebi norms
