After several weeks of hiatus caused by nationwide lockdown following COVID-19 outbreak, some actions are returning to the Indian stock market. Companies are returning to the market with their IPO offers to entice investors once more. After the announcements of IPO share launch by Rossari Biotech and Gland Pharma, the stage is now ready for real estate developer Mindspace to enter it with their Rs 4,700 crores of IPO share launch.
The offer will open during the last week of July. Sources aware of the development have disclosed that the IPO offer will contain both offer-for-sale shares and fresh scrips worth Rs 1000 crore. Mindspace Business Park REIT will be the second Real Estate Investment Trust or REIT to enlist with the stock exchange.
Mindspace is a leading name in the domain with leasable commercial space of 29.5 million square feet available in prime locations of Mumbai, Pune, Chennai, and Hyderabad with around 92 percent occupancy. The company reported twenty-one percent rise in its revenue earning from the last year to Rs 2,026 crores.
The news of Mindspace REIT IPO launch has sent big ripples in the market. Experts deem this announcement is significant considering the current market condition which has dampened demand in several sectors, including real estate. They think it is an indication that there is still a demand for commercial real estate stocks among global investors. Commercial real estate leasing in India is still an attractive segment to offer a lucrative return. Even during the current lockdown situation, Indian commercial real estate sector has collected almost 97 percent rent between April and June. It indicates that growth indices of the commercial real estate are still intact despite the work-from-home concept gaining momentum.
Knowing The Company
Incorporated in 2003, Mindspace is only the second REIT, after Embassy, to register in Indian bourses. It is backed by Mumbai-based real estate developers, K Raheja Corp and private equity firm, Blackstone.
Mindspace has over 29.5 million square feet of leasable office space in Mumbai, Pune, Hyderabad, and Chennai with occupancy portfolio standing at 92.4 percent and an average rent of Rs 52.5 per square feet.
The company reported a robust growth of 21 percent in revenue in FY 20 with the profit remaining unchanged from last year at Rs 514 crore.
Mindspace is a REIT or real estate investment trust. Although REITs are quite popular globally, it is relatively a new concept in the Indian context. These are companies responsible for owning, operating, and financing income-generating commercial real estate spaces. A REIT, like mutual funds, pull funds from different investors to invest in properties, commercial or otherwise. REITs create a steady stream of income for investors and considered highly liquid in the share market. In India, according to REIT Regulation law, a REIT is required to invest at least 80 percent in the property of what it expects to earn as rent from the property. The law also requires the developer to remain invested in the property for at least three years after completion before it can decentralise its ownership.
Overall market significance
Mindspace Business Parks REIT IPO is undoubtedly significant for both corporate and investors. According to market experts, the property developers have chosen an ideal time to launch their REIT IPO proposal when the ten-year g-sec interest is at the lowest, allowing investors an alternative option to transfer their investable funds. REIT scrips create a steady stream of income for the investors in the form of compulsory dividend payment. As per REIT Regulation, a REIT company must distribute 90 percent of the net distributable income in the form dividend.
Given the current market scenario and basing a guess on Embassy REIT’s share performance, one can say that Mindspace REIT IPO might also grab the attention of the investors. Launched in April 2019, Embassy IPO shares have generated a steady return of 8 percent for its stakeholders. Rossari Biotech IPO scrips launched in July saw a whopping subscription on the last day of bidding.
As per sources aware of the developments, Mindspace IPO subscription scheme will contain Rs 1000 crores of fresh shares and Rs 3,500 crores of offer-for-sales scrips. Retail investors too can enrol for bidding for a minimum volume of 50,000 scrips.