Sahara Prime City project hopes pinned to IPO

Sahara Prime City (SPCL), promoted by the Sahara group, is betting on its proposed initial public offer (IPO) to bring in enough capital for construction and development of integrated townships.

“We plan to raise Rs 3,000 crore from the markets, of which Rs 2,700 crore will be used for construction and development of projects and Rs 300 crore for corporate expenses,” Sushanto Roy, head - infrastructure and housing, told DNA Money.

SPCL is developing only integrated townships as part of its business model and has so far invested Rs 3,500 crore on this. The company plans to develop 217 townships across the country under the brand name Sahara City Homes. The list includes 10 townships each in Andhra Pradesh and Tamil Nadu, 19 in Bihar, 4 each in Assam, Chhattisgarh and Orissa, 11 in Gujarat, 14 in Hyderabad, 6 each in West Bengal, Jharkhand and Uttaranchal, 12 in Karnataka, 16 in Madhya Pradesh, 17 in Maharashtra, 1 each in Pondicherry, Chandigarh, Goa, Himachal Pradesh, Jammu & Kashmir and Kerala, 9 in Punjab, 13 in Rajasthan and the biggest chunk, 50, in Uttar Pradesh.

In the first phase, 102 cities would be developed. Ten of these are already under construction, of which possession keys for three —- in Lucknow, Nagpur and Indore —- would be handed out next year.

“We plan to do 16 cities in the next few months. We are going to concentrate on 26 cities now, going up to 70 cities in next 2-3 years, as and when we get the sanctions,” Roy said.
The company has a land bank of 8,500 acre, of which 99.6% has been paid for.
“The projects have been funded by internal accrual. They have been financed through sale proceeds and internal accruals, and the company’s debt-to-equity ratio is 0.16x,” Roy said.

SPCL expects to generate Rs 1,000-1,200 crore revenue from each project. SPCL is awaiting Sebi nod for the IPO, which will dilute 10-15% promoter stake. The float is expected in the March quarter and could happen as early as January, Roy said.

According to real estate sector analysts, SPCL needs the IPO money to come through if it has to commence construction in the next 16 cities. Any failure will delay the fund-raising from other investors and set back project launches.

SPCL is also in talks with private equity players to raise around Rs 1,000 crore through sale of stake in projects.