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Mindspace Business Parks REIT IPO subscribed nearly 13 times

Mindspace Business Parks REIT IPO subscribed nearly 13 times

Synopsis

The issue attracted bids for 87.8 crore units as against the total issue size of 6.77 crore.

Mindspace Business Parks REIT received a robust response and was subscribed nearly 13 times on Wednesday, data from NSE showed.

The issue attracted bids for 87.8 crore units as against the total issue size of 6.77 crore. While the institutional portion was subscribed 10.61 times, the non-institutional segment, including high net worth investors and retail, was subscribed 15.77 times.

“Investors have demonstrated a strong interest for Mindspace REIT and this has resulted in huge over-subscription of the issue. Some of the key factors for the success of this REIT are strong developer credentials combined with positive outlook for commercial real estate, established portfolio which ensures stability of returns via rental income,” said Ramesh Nair, CEO & Country Head, JLL India.

“This clubbed with the fact that the majority of distribution of income is by way of tax free dividend works very well in investors’ interest,” he added.

REITs or real estate investment trusts are companies that own or finance income-producing real estate. The stockholders of a REIT earn a share of the income produced through real estate investment.

Mindspace Business Parks REIT was looking to raise up to Rs 1,000 crore through issuance of fresh units and up to Rs 3,500 crore through an offer for sale. On Friday, the REIT raised Rs 2,644 crore from anchor and strategic investors, with HSBC Global, Fidelity and Nomura Trust, Capital Income Builder and Cohen & Steers among major investors.

Analysts noted that the company, which originally filed a draft offer document with Sebi on December 31 and again filed a new offer document with Sebi on July 17, has reduced its market-to-market (MTM) expectations on upcoming lease renewals, but had recommended subscribing to the issue.

In the original draft offer document filed by the company, the MTM spread for FY21 and FY22 was 40 per cent and 44 per cent, respectively. This spread expectation has been reduced to 34 per cent and 40 per cent for FY21 and FY22, respectively.

The REIT’s consolidated debt stood at Rs 7,382 crore as on March 31, which primarily includes lease rental discounting loans in various SPVs. A sizable amount of debt is proposed to be pre-paid through IPO inflows. ICRA noted that the consolidated debt is expected to be Rs 3,614 crore post listing. The incremental debt drawdown for the under-construction assets will increase the debt to some extent by FY2021 end.

“ICRA estimates the debt/net operating income to remain comfortable in the range of 2.75-3.15 times in FY2021 and LTV (loan-to-asset value) in the range of 15-17.5 per cent. Low initial leverage provides financial flexibility to fund the future construction and acquisitions,” it said.

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