New Delhi: The initial public offer of real estate major Omaxe, expected to raise about Rs 550 crore received positive response from buyers and was subscribed by more than 35 times on the last trading day of the week.
The IPO received bids for 63.09 crore shares against 1.77 crore shares on offer, getting subscribed 35.45 times, according to the latest data available on the bourses.
The price band of the offer, which opened on July 17 and closed July 20, was fixed at Rs 265-310 per share. The issue received good response from Qualified Institutional Buyers and non-institutional investors.
Of the total issue, about 1.75 crore equity shares are meant for the public, while the balance 2.96 lakh shares have been reserved for eligible employees. There is also a greenshoe option of 17.5 lakh equity shares.
The issue would constitute 11.20 per cent of fully diluted post-issue paid-up capital of the company if the greenshoe option is exercised and, 10.30 per cent if the option is not exercised.
The proceeds of the issue would be utilised for payments related to land, repayment of loan and to fund development and construction costs of some of the company's projects.
New Delhi-based Omaxe has a land bank of over 3,000 acre and 47 projects that are under development.
Omaxe IPO at a glance
Strong construction background and execution skills
Omaxe has been into constructing and contracting businesses for the past 18-years. The company was founded as a civil construction and contracting organization in 1989, which subsequently diversified its business in 2001, to focus on real estate.
As on March 31, 2007, it has completed more than 120 construction projects and 10 real estate projects, including 7 Group Housing schemes,(GHS), one integrated township, and 2 commercial projects covering an area of 5.13 mn sq ft.
Extensive owned land bank
As of FY07 end, Omaxe had extensive land reserves 3,255 acres, of which, 3,096 acres are currently under development or under various stages of approval for development, representing 150 mn sq ft of saleable area. Out of this total land bank, Omaxe owns 82% directly and the remaining through JVs and subsidiaries. This mitigates risks associated with any possible default in the company’s land acquisition.
Focus on Tier 2 and Tier 3 cities
Nearly 69 per cent of Omaxe’s land is in Tier-2 and Tier -3 cities that are estimated to drive India’s investment and growth phase owing to their huge unexplored potential. Jaipur (14 mn sq. ft., 9 per cent of total saleable area), Raipur (14 mn sq. ft., 9 per cent of total saleable area), Patiala (12 mn sq. ft, 8 per cent of total saleable area), and Indore (10 mn sq ft., 7 per cent of total saleable area) are the key cities where Omaxe has considerable land reserves.
Valuations
Edelweiss Securities have valued the company on NPV basis. Their NAV estimate is INR 400–405. This represents a 51 per cent – 31 per cent upside over the IPO price of INR 265-310 respectively. The analysts have discounted the cash flows at a WACC of 15 per cent over a period of four-years.
Government of India’s (GoI’s) increased thrust on improving the infrastructure and economic development in Tier 2 and Tier 3 cities is likely to provide Omaxe a big growth opportunity, going forward. Edelweiss Securities believe the company will be able to make the best of this growth opportunity, given its proven execution capabilities. It recommends ‘Subscribe’ to the IPO.
With excerpts from a moneycontrol.com report
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