THE NEW LAND BARONS
The clocks have stood still at the Gurgaon-based IST Ltd (formerly Indo Swiss Time) for several years now, Yet, if you look at the scrip�s performance on the markets, you would think that someone had tied a cracker to its tail. On the Bombay Stock Exchange (BSE), on 2 August 2006, it was quoted at Rs 42. On 10 January 2007, it hit a high of Rs 614.
In Mumbai, Nesco (earlier New Standard Engineering) has long given up its original avatar as an engineering company. But it has been merrily issuing bonus shares and dividends. It too hit a high of Rs 2,249 on 11 January.
If you are wondering why the ISTS and Nescos are still in fine fettle, its because they are sitting on prime real estate. We are shifting our factory from the Delhi-Gurgaon road and converted the land into an SEZ, says IST company secretary Sandeep Gupta.
Its been a second coming also for filed a new Red Herring prospectus with the Securities & Exchange Board of India (Sebi). In 2006, it had announced plans to raise Rs 13,000 crore plus (see Business India 21 May 2006).
In Delhi again is Emaar MGF Land which is eyeing a more-than-Rs 10,000 crore slice of the IPO pie.
Scaling up
If these are the two big boys, others too are scaling up plans. The Mumbai-based Lodha group, which says it has the largest land bank in the city, is looking at an IPO of Rs 2,000 crore. The group has so far been getting investments on a project basis from venture funds.
The action is not limited to Mumbai and Delhi. In West Bengal, the PS group is gearing up for its IPO, the details of which are still being worked out.
The Bangalore-based Brigade group has also begun looking at an IPO to fund its expansion. It has been focusing largely on Bangalore and Mysore so far.
IPOs queuing up
According to Prithvi Haldea, managing director of Prime Database, which keeps tabs on public issues, there are more than Rs 30,000 crore in IPOS queuing up to tap the market in the next three months.
Some real estate companies are opting for private equity.
Others are raising funds at the Alternative Investment Market (AIM) of the London Stock Exchange (see box).
Private equity and AIM are, in a sense, stepping stones. According to analysts, all worthwhile companies will eventually end up on the BSE or the National Stock Exchange (NSE). But what explains their choice of the most appropriate route to take.
Residential focus
If you look at the bigger picture, the Rs30,000 crore ($6.8 billion) being raised in the next three months is relatively peanuts. According to Edelweiss Research, there will be an average annual addition of 2.3 billion sq ft in residential, 61 million sq ft in office, and 25 million sq ft in retail space.
Why has real estate in India taken so long to get off the ground? One reason is the archaic legislative environment that has hamstrung the industry. A more important issue is the suspicion with which the authorities have held builders.
There are other systemic issues. Ravi Puravankara of Puravankara Projects says every project needs at least 30 clearances. The government needs to simply this. Jaishankar of the Brigade group says that lack of infrastructure, high taxation and time-consuming approvals, which add to the cost factor, are the bane of the industry.
Amid all this euphoria, there are those who side with the RBI and feel that a correction in real estate prices is long overdue. HDFC chairman in real estate prices is long overdue. HDFC chairman Deepak Parekh, for one, says that property prices could see a 15-20 percent correction in 2007