Lodha Developers gets nod for Rs 5,000 crore IPO

Lodha Developers has received a nod from the Securities and Exchange Board of India (Sebi) on Monday to come out with the second-largest initial public offering in the realty sector after DLF’s issue in 2007.

Lodha is looking at raising around Rs 5,000 to Rs 5,350 crore by issuing a fresh equity capital through the IPO and the secondary share sale by promoters of  Rs 1,300 crore to Rs 1,800 crore. 

According to market sources, the offer will value Lodha Developers at around Rs 38,000 crore.

The Mumbai-based developer is also looking at trebling its commercial portfolio in the next few years.

As on December 31, 2017, the Mumbai-based company had completed 3.83 million square feet of leasable area and has approximately 11.60 million square feet of ongoing and planned commercial developments.

In the Draft Red Herring Prospectus (DRHP) filed with the market regulator, it reads that their “Focus (is) on growing the commercial portfolio consisting of office and retail projects”.

“We intend to expand our commercial portfolio consisting of office and retail projects to leverage on the demand for office and retail real estate in the Mumbai Metropolitan Region (MMR). We believe that infrastructure constraints will drive more mixed-use developments, where most of our commercial developments are presently located,” the DRHP filed in April 2018 said. 

“The realtor has some ready commercial projects within the MMR. It is changing the scale of its commercial projects and going for bigger ones like it has been doing big residential projects. Commercial projects provide good revenue to a company, including providing steady income through lease,” said Arun Kejriwal, an independent analyst.

Apart from providing steady cash flows from leased commercial portfolio, the company can monetise these commercial assets in future whenever rentals rise. 

A certain or entire stake in these assets could be sold, whenever required. However, that doesn’t mean the realtor will discontinue developing ‘for-sale’ commercial units and residential projects. The Lodha family promoted company is the largest real estate developer in India by residential sales and does not intend to dilute this segment. 

As per the plans, Lodha is coming up with office spaces for IT and IT-enabled services, premium office buildings, affordable commercial areas, a 120 acre industrial and warehousing park, retail space, at different locations in the MMR. For the first time it is setting up a logistics facility. This industrial and warehousing park is planned near to its Palava project on the outskirts of Mumbai. 

The plan is to have high-end manufacturing and warehousing space to leverage on the growing demand for warehousing and industrial facilities and its proximity to various parts of the MMR, the Jawaharlal Nehru Port Trust and the proposed Navi Mumbai International Airport.

As on December 31, 2017, the Lodha Group has around 4,450 acre of land bank at various locations within the MMR. A chunk of this land holding is at Bhiwandi and Dombivali near Mumbai outskirts. The 4,450 acre of land reserves has a potential of approximately 385 million square feet of developable area of residential as well as commercial assets.

The proceeds from the IPO is proposed to be utilised to reduce its aggregate outstanding borrowings on a consolidated basis, which it is of the opinion is “substantial” that can even affect its “ability to obtain future financing” and also for general corporate purposes. 

REALTY TOWERS

• The offer will value Lodha Developers at around Rs 38,000 crore
   
• The developer is also looking at trebling its commercial portfolio in the next few years