‘Subscribe’ to Oberoi Realty IPO, says Edelweiss

MUMBAI: Edelweiss has recommended investors to ‘Subscribe’ to initial public offering of Oberoi Realty.

The company is entering the capital market to raise Rs10-10.3 billion through an IPO in the price range of Rs 253–260 per share, giving post-money valuation of Rs 83-85 billion. As per the issue terms, 39.6 mn shares will be issued, resulting in dilution of 12%.

Oberoi plans to utilise Rs 7.4 bn of the IPO proceeds towards construction and development of Oberoi Exquisite-I (~Rs 4.1 billion), Commerz II – Phase I (~Rs 1.9 billion) and Oberoi Splendor Commercial I (~Rs 1.4 billion). It intends to use the balance proceeds to acquire land/land development rights (~Rs 2.2 billion).

“We have factored in Oberoi’s cash flow from ~20 msf over 8-9 years and discounted it with WACC of 14%. Our NAV for the company stands at INR 91.7 bn or INR 279/share at the lower price band. Residential projects of ~12.3 msf account for ~51% of the company’s GAV, commercial/retail projects of 5.4 msf (including rent-yielding properties) 43% of GAV, with the balance accounted for by hospitality/social infrastructure projects.

At the lower price band, the stock is available at 9% discount to NAV. We believe that the issue is fairly priced, taking into account the company’s current land bank. However, possible redeployment of cash for new land acquisitions may offer upsides to the NAV. We, therefore, recommend ‘SUBSCRIBE’ to the IPO at the lower price band, keeping in mind the long-term prospects,” the report said.