Coming HDIL IPO not to be affected due to liquidity crunch

Kolkata, Jun 27 (UNI) Liquidity crunch in the real estate market, bothering small time players, would not affect the coming IPO of HDIL.

Speaking at the sidelines of a press conference here today, Housing Development&Infrastructure Ltd(HDIL) Director Ashok Kumar Gupta ruled out the impact of liquidity crunch on their IPO.

The crunch was driving many small-time developers to look around for a cover. Many small developers were trying to liquidate their land or incomplete projects by selling them to larger developers or private equity players even on reduced valuations.

The stagnant market, where property prices were not looking up, was a major cause of concern for the real estate industry. Industry sources said the fund flow into this sector had begun to dry up.

Selling incomplete projects to big developers or private equity firms was an option explored by many such developers. This trend was being noticed in developed rela estate markets like Mumbai.

Industry observers said the residential property market, which remained stagnant for the past few months, had started developing cracks, especially in Mumbai's suburban markets and the tier-II and III cities.

The volume of sales had dropped by 70-80 per cent in the past two months in the wake of rising interest rates and additional pressure on household budgets.

Besides, there was pressure on real estate developers due to the tightening of fund-raising norms. The recent moves by the Reserve Bank of India (RBI) and the Finance Ministry had left them with a few choices like private equity and public offering for their fund needs.

In the month of June, in a span of just a week two mega issues in the form of DLF and ICICI Bank garnered almost Rs 30,000 crore from the capital market.

Now close on the heels of DLF, Housing Development and Infrastructure Ltd (HDIL) was tapping the capital market with the issue in the price band of Rs 430-500, and the amount to be raised was in the region of Rs 2000 crore.

HDIL is a real estate company which builds residential, commercial, and retail projects and also undertakes slum rehabilitation schemes in Mumbai. The company derives most of its business from the Mumbai Metropolitan Market(MMM).

The company will built a SEZ in 560 acre in the MMM area. It would a multi-service SEZ, which will house Biotech, IT and financial services, Wadhawan Group, HDIL group company , CFO Prashant Chaturvedi said.

The company, in association with a foreign partner, would enter into the hospitality industry to set up a hotel in the Mumbai.

The majority of the funds to be raised through the IPO will be utilised to fund ongoing projects and a small amount would be used for the acquisition of land and development.

The company has a land reserve equivalent of 112 million square feet of saleable area of ongoing and planned projects of which 92.8 million sq. feet are in the Mumbai Metropolitan region and 40 per cent of which is under construction.

HDIL has around 45.5 million sq feet under construction and an additional 66.6 million sq feet in various stages of planning. Much of this developable area had come from the firm's slum rehabilitation activates under which a builder gets to builds additional space in return for free housing given to slum dwellers.

HDIL land bank of 2,500 acres spread across Mumbai, Kochi and Hyderabad, which had been valued at Rs 21,500 crore.

A recent study conducted by the global research and consultancy firm Ernst and Young revealed that the global IPO space had set a record by raising an amount of $ 246 billion in 2006 compared to $ 167 billion in 2006.

India had the distinction of emerging as the eight largest IPO market with $ 7.23 billion (Rs 30,000 crore) raised through 78 IPO's. However, the overcrowding was major cause of concern in the realty sector which has led to liquidity crunch.

UNI