The initial public offer (IPO) of Embassy Office Parks REIT, backed by private equity giant Blackstone Group LP and Bengaluru-based developer Embassy Property Developments, opened for subscription on Monday. The IPO is expected to raise up to Rs 4,750 crore, while it has already received Rs 876 crore commitment from strategic investors.
The price band of the offer has been fixed Rs 299 - Rs 300. Minimum lot size for the offer has been set at 800 units and in multiple of 400 units, thereafter.
The offer, which will end on March 20, was subscribed 20 per cent on first day of the bidding process, NSE data showed.
Here's what leading brokerages have to suggest regarding the offer -
We recommend “Subscribe” for long-term horizon to the issue considering quality of assets backed by global player Blackstone. We believe the yield has upside potential on account of rental escalation and expansion in asset portfolio following a comfortable leverage position.
The company’s high quality tenant base along with long-term contracted rentals (with a weighted average lease expiry of 7.0 years) provides considerable stability to its portfolio. While its portfolio is highly stabilised at 95 per cent committed occupancy, it is well positioned to achieve further organic growth through a combination of contractual rent escalations, re-leasing at market rents, lease-up of vacant space and new construction to accommodate tenant expansion.
Though the company has best-in-class office properties with high quality infrastructure, highly experienced management team and renowned sponsors with global expertise and local knowledge, slowdown in the economy, delay in execution of under construction properties and adverse government regulations are the key risks to the company. Assign a “Subscribe with Caution” rating for the issue.
With REITs, investments in real estate would be simplified and retail investors would have another option to consider. A lot depends on the yields that the REITs will deliver. A good IPO would open the doors for several more REITs in near future. Indian commercial real estate is populated with several such high quality assets, which can be rolled into REITs very soon. For the developers, this would be a good avenue for raising finance to repay debts or to raise capital for O&M of assets held by the REIT.
Risks to the company's financials include revenue concentration, as significant portion is derived from limited number of large tenants. This apart, slowdown in the real estate sector could impact business operations. Besides, delay/cost overruns in under construction projects could impact financial performance.