Steep pricing of its shares, especially at a time when secondary markets are volatile, had taken a toll on the Puravankara Projects initial public offer.
Lukewarm response to the issue even at 2 pm on Friday — the closing day — prompting the issuer to keep the issue open till August 8.
Also as per the mandatory requirement, the issue price has been slashed from the initial band of ‘Rs 500 to Rs 525’ to ‘Rs 400 to Rs 450’.
“The issue has been affected by a combination of factors. But the main issue is pricing. The debt-equity ratio is also high,” said a broker dealing in primary issues. Realty analyst who has valued the company said most recent realty issues were priced at a discount to the net asset value of the company, whereas Purvankara Projects at Rs 500-525 was priced very close to the NAV. “Omaxe was attractively priced at a discount of 30-35 times to the NAV and HDIL issue was priced at 20-25 per cent discount NAV,” he said.
Purvankara IPO opened for subscription on July 31 and by 2 pm on August 3 the issue had received only 38 per cent bids. In the next two hours, the percentage of bids received dropped to 33 per cent with revision of price and extension of issue.
The day the issue was to close, it received only 33 per cent bids. The qualified institutional bidders (QIB) portion too did not fill up and as at the end of third day of the issue, it had received only 42 per cent subscription.
“The company had not valued its land bank but stated that it is developing 102 mn sq ft, and the saleable area out of it would be 94 mn sq ft. The formula works out to utilisation of three FSI, which is not feasible with residential projects in most cities and the exception may be Bangalore,” said an analyst.
Book building for two other smaller issues are on currently. The Rs 150 crore issue from Take Solutions, life sciences and supply chain management company and a similar sized issue from apparel firm KPR Mill. Take’s qualified institutional buyers’ (QIB) portion had over subscribed by one time by the close of second day.
But the retail portion had seen only 0.02 times. The price band for Rs 10 share of the company is Rs 675 to Rs 730. KPR Mill had bids amounting to 90 per cent on the QIB side and the issue and had done 0.6 times in all.
There was a spate of real estate issues in the last two months from the largest one, DLF to HDIL, Omaxe and IVR Prime. Among all the issues Omaxe had a euphoric response of 68 times over subscription.