QIPs: A Funding Choice for Real Estate Developers' Growth and Debt Reduction.

Published Date: 12/07/2024

Puravankara Limited plans to launch a qualified institutional placement (QIP) to raise Rs 700-800 crore for organic and inorganic growth opportunities and debt reduction.

"The Indian real estate sector is witnessing a surge in qualified institutional placements (QIPs) as developers look to tap the markets for funding growth and reducing debt. Bengaluru-based Puravankara Limited is the latest to join the bandwagon, planning to raise Rs 700-800 crore through a QIP. Founded in 1975, Puravankara has three prominent brands – Purva, Provident Housing, and Purva Land. As of March 31, 2024, the company has delivered 86 residential and commercial projects measuring around 50 million square feet. It has also recently forayed into the redevelopment space in Mumbai by securing the rights for two housing societies spread over three acres with a potential gross development value of Rs 1,500 crore.

Puravankara plans to use the funds for both organic and inorganic growth opportunities, and will spend the money on capex and for reducing debt. The company's net debt stood at Rs 2,151 crore as of March 31, rising from a net debt of Rs 1,741 crore at the end of the previous quarter.

Puravankara is not the only real estate developer to tap the markets for funding. Mumbai-based Lodha Group (Macrotech Developers Ltd) raised Rs 3,300 crore through its QIP in March, while Mumbai developer D B Realty raised Rs 920 crore through its QIP in the same month. Another Mumbai developer Rustomjee (Keystone Realtors Ltd) raised Rs 800 crore in its QIP in May. Real estate construction firm Capacit’e Infraprojects raised Rs 200 crore from its QIP in January.

The spate of QIPs from the real estate sector reflects a change in real estate companies' dependence on debt and alternative sources of capital funded growth of the past. It also reflects investor confidence in the real estate sector's growth prospects. According to a report by PropTiger.com, sales and new supply witnessed a growth of 8 percent and 11 percent year-on-year (YoY), respectively, across eight major cities in the country, driven by real-estate markets in western India.

Calendar year 2024 has been an active year for corporate fundraising through the QIP route, with 37 companies raising Rs 32,527 crore in the first six months of the calendar year, compared to 45 companies raising Rs 52,349 crore in the entire calendar year 2023.

   Puravankara Limited is a Bengaluru-based real estate developer founded in 1975. The company has three prominent brands – Purva, Provident Housing, and Purva Land. It has delivered 86 residential and commercial projects measuring around 50 million square feet and has a land bank of over 36 million square feet and over 23,000 homes with a total area of over 31 million square feet under development.

  Information  The Indian real estate sector has witnessed a significant shift in its funding landscape in recent years. With the introduction of the Real Estate (Regulation and Development) Act, 2016 (RERA), and the Goods and Services Tax (GST), the sector has become more organized and transparent. The COVID-19 pandemic has also accelerated the shift towards institutional funding, with developers looking to reduce their dependence on debt and alternative sources of capital."

FAQs:

"Q: What is a Qualified Institutional Placement (QIP)?

A: A Qualified Institutional Placement (QIP) is a fundraising route used by listed companies to raise capital from institutional investors.

Q: Why are real estate developers turning to QIPs?

A: Real estate developers are turning to QIPs to raise funds for growth and reducing debt, reflecting a change in their dependence on debt and alternative sources of capital.

Q: Which real estate developer has raised the highest amount through a QIP in 2024?

A: Lodha Group (Macrotech Developers Ltd) has raised the highest amount of Rs 3,300 crore through its QIP in March 2024.

Q: What is the current net debt of Puravankara Limited?

A: The current net debt of Puravankara Limited stands at Rs 2,151 crore as of March 31, 2024.

Q: How has the real estate sector performed in 2024?

A: The real estate sector has witnessed a growth of 8 percent and 11 percent year-on-year (YoY) in sales and new supply, respectively, across eight major cities in the country, driven by real-estate markets in western India."

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