Infy effect shows up in realty IPO
Sobha Developers mops up 83% of contractual revenue from Infy; cites it as a risk factor in Red Herring.
By Boby Kurian & Preiti Sharma Shahane, TNN |
BANGALORE: The fortunes OF Infosys Technologies weighs on the Bangalore-based Sobha Developers , which is gearing up for an IPO. The realtor is the IT major’s builder of choice.
Sobha’s revenues from Infy’s projects constituted 95%, 96% and 83% of its total contractual revenue over the last three years. In fact, the company has cited its dependence on Infy for a significant portion of revenue as a risk factor in its draft Red Herring Prospectus.
According to the filing with Sebi, “In the event that Infosys either reduces the number of contractual projects or stops providing us with projects it will have an adverse effect on our business, results of operations and financial condition.
Furthermore, if the rate of growth of India’s IT sector or Infosys’s business, should decline, our revenue from this sector or from Infosys may decline.” Valued at Rs 4,500-crore , Sobha is looking to dilute 13-15 % stake through the IPO, sources said. The proceeds will be used to finance land acquisitions, construction and development of existing and proposed residential projects and retire certain loans. Sobha’s contractual project revenues pegged at Rs 167.87 crore in FY’ 06 account for 32.20% of its Rs 628.43 crore topline. And Infy accounted for 82.95% of its contractual revenues during the year. Sobha is also exploring the opportunity to set up an IT SEZ in Chennai.
Bangalore’s real estate boom has been fuelled by the IT industry growth in the past one decade. Bangalore’s annualised commercial space absorption of 9-10 million sq ft ranks amongst the highest in the world. Infy’s role in Sobha’s growth, one among the top 10 realty firms, is an indication of the IT juggernaut’s influence on the fortunes of the real estate business.
Post-IPO , sources said, Sobha planned to correct its South India skew and will foray into new markets such as Mumbai, Pune, Delhi-NCR , Chandigarh, Chennai, Hyderabad , Kochi and Coimbatore. It may diversify to include a healthy mix of hospitality and retail development.
Sobha’s revenues from Infy’s projects constituted 95%, 96% and 83% of its total contractual revenue over the last three years. In fact, the company has cited its dependence on Infy for a significant portion of revenue as a risk factor in its draft Red Herring Prospectus.
According to the filing with Sebi, “In the event that Infosys either reduces the number of contractual projects or stops providing us with projects it will have an adverse effect on our business, results of operations and financial condition.
Furthermore, if the rate of growth of India’s IT sector or Infosys’s business, should decline, our revenue from this sector or from Infosys may decline.” Valued at Rs 4,500-crore , Sobha is looking to dilute 13-15 % stake through the IPO, sources said. The proceeds will be used to finance land acquisitions, construction and development of existing and proposed residential projects and retire certain loans. Sobha’s contractual project revenues pegged at Rs 167.87 crore in FY’ 06 account for 32.20% of its Rs 628.43 crore topline. And Infy accounted for 82.95% of its contractual revenues during the year. Sobha is also exploring the opportunity to set up an IT SEZ in Chennai.
Bangalore’s real estate boom has been fuelled by the IT industry growth in the past one decade. Bangalore’s annualised commercial space absorption of 9-10 million sq ft ranks amongst the highest in the world. Infy’s role in Sobha’s growth, one among the top 10 realty firms, is an indication of the IT juggernaut’s influence on the fortunes of the real estate business.
Post-IPO , sources said, Sobha planned to correct its South India skew and will foray into new markets such as Mumbai, Pune, Delhi-NCR , Chandigarh, Chennai, Hyderabad , Kochi and Coimbatore. It may diversify to include a healthy mix of hospitality and retail development.
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