Nitesh Estates halves IPO share price

BANGALORE: Nitesh Estates, a Bangalore-based realty firm, has nearly halved the price of its shares to be offered in the IPO, as poor market conditions and lack of investor appetite force realty companies to lower their ambitions.

The shares will now be sold at Rs 60-65 per share, two senior company officials said. The company was considering a band of Rs 120-128, but was forced to revise it due to lukewarm investor response. “The IPO is heavily discounted and will have an attractive pricing for both anchor as well as retail investors,” one of the senior officials added. The company had planned to raise up to Rs 450 crore, which includes a greenshoe option of Rs 50 crore.

Nitesh has also increased the number of shares on offer in order to increase the amount of money that could be raised. The equity dilution will now be 45%, compared with the earlier figure of 35-40%. The shareholding of Nitesh Shetty, the promoter, will drop to 45-50% from 85% now. Global private equity fund house Och-Ziff holds the remaining 15% stake. The IPO will open on April 22.

Appetite for real estate IPOs or public issues has shrunk dramatically among investors, especially after the 2008/09 meltdown. Two recent realty IPOs got a lukewarm reception from the market, forcing investors to be wary.
“Global investors appetite for Indian real realty has reduced due to fear of asset bubble in the residential real estate space. Any aggressive pricing at this juncture could be counter productive,” said Jai Mavani executive director KPMG.

Godrej Properties listed at a small premium, while DB Realty listed at a discount to the offer price. With banks reducing their lending to real estate companies at the behest of RBI, realty companies have little option, but to look towards private equity partners and the stock market.

Nitesh will use the IPO money to fund existing projects and new launches in the residential segment. This includes completion of the proposed Ritz Carlton Hotel and a 7.6 million sqft retail mall in Bangalore. “The IPO money will also be used to repay outstanding debt of Rs 90 crore,” a top company official, who did not want to be named, said. The ‘pre-money’ or before the IPO valuation of Nitesh Estates was around Rs 950 crore. This has now plunged more than 50% to Rs 420 crore because of the cut in the issue price, said an investment banker involved in the IPO proceeding.

“The price band has been decided in consultation with the investors,” said a top official of the company, who estimates that the firm will be valued at Rs 1,000 crore on completion of the public offer.

Nitesh Estates was founded in 2004 by Nitesh Shetty. It is one of India’s fastest growing integrated real estate developers with over 19 million sqft of real estate under development across India

On April 22, the company will announce the names of about three institutional investors, who will be anchor investors. The IPO will then open to retail investors on the next day. ICICI Securities, Enam Securities, Kotak Mahindra Capital Company and JM Financial Consultants are the book running lead managers to the issue. Shares offered through the IPO are proposed to be listed on the National Stock Exchange and the Bombay Stock Exchange

There are over half a dozen realty players such as Prestige Estates, Lodha Developers, Emaar MGF, Sahara Prime, Oberoi Realty and BPTP, who are planning to raise money through the IPO route.

While BPTP has said it plans to raise Rs 1,500 crore in the early next fiscal, Emaar MGF has Sebi approval for a Rs 3,850-crore issue, while Lodha Developers has also received approval to raise Rs 2,790 crore through an IPO offering.

Nitesh Estates has raised private equity capital from Citi Property and HDFC AMC for specific projects and SPVs of the company. For the year ended March 2010, the company had total income of Rs 100 crore, compared with Rs 70 crore in March 2009.