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Property IPO wave risks investor indigestion
Investors are more likely to choke on a glut of India property IPOs set to hit the market this year than gobble them up. Even though Godrej made a strong debut this month in the first Indian property listing in two years, IPOs of other developers could meet more restrained investor buying as they compete with a slew of large public sector offerings.
At least 16 real estate firms have lined up plans for initial public offers to raise about $6 billion, buoyed by an 81 percent rise in the Mumbai stock index last year and as property buyers return. “If all the IPOs get bunched up, we have a problem. Everybody may not see the light of day,” said Jayesh Shroff, fund manager at SBI MF, which manages about $8 billion worth of funds.
What awaits India’s property IPO rush may be exactly what happened to China’s offerings in recent years. The Chinese property sector saw early success from some offerings several years ago, but a dozen or so that followed suffered as investors grew tired of the same old IPO story. And it could also play out as it did in India in 2007, when DLF and others floated, but are now among the worst market performers, trading way below their IPO prices, with market valuations sliding between 70-90 percent. Godrej has already dropped 17 percent from its Jan. 5 debut high after its around $100 million IPO.
News Published Under: Banking and Finance, Real Estate India | No Comments »