Ravi Karandeekar's Pune Real Estate Market News Blog: Omaxe IPO : everybody was positive!

Omaxe

Background:The company was originally set up as Omaxe Builders Private limited in 1989, promoted by Shri. Rohtas Goel , the founder, to undertake construction & contracting business. The company further changed its constitution to a limited company known as Omaxe Construction Ltd., in 1999. The name of the company has now changed to OMAXE LTD from 2006. The company began life as a civil construction and contracting company, has Successfully executed more than 120 prestigious Industrial, Institutional, Commercial, Residential and Hospital construction projects.

Omaxe IPO fully subscribed on day 1

Mumbai, July 17: Real estate developer Omaxe Ltd's initial public offer, expected to raise about Rs 550 cr, got fully subscribed on its first day on Tuesday.

The IPO received bids for 2.57 cr shares against 1.77 cr equity shares on offer, getting subscribed 1.44 times, latest data available on the stock exchanges show.

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Omaxe: Likely to prove rewarding

Omaxe, a real estate player, is open for subscription with a public issue of 1.78 crore equity shares of Rs 10 each with an additional green shoe option of upto 17.50 lakh equity shares in the band of Rs 265 to Rs 310 per share on July 17. The issue will close for subscription on July 20, 2007.

As per calculations, the NPV works out to Rs 342 per share on a conservative basis. At the price band of Rs 265-310, the stock is at a discount of 22.5-9.4% to the NPV. In comparison, Unitech and DLF currently trade at a premium of 0.9% and 47.9% to NPV as per calculations. The DLF IPO price itself was at a premium of 21-33% to its estimated NPV. HDIL, which came out with an IPO early this month at a price band of Rs 430-500 per share is at a (discount)/premium of (12.1%) � 2.2% to its NPV.

Taking into account the price band of Rs 265-310, Omaxe is available at a FY07 P/E band of 18-21, as against a FY07 P/E of 53.6 for DLF, 35.1 for Unitech, 42.4 for Sobha and 23.9 for Parsvnath.

The overall picture appears bright for Omaxe and its IPO, which is quite reasonably priced, is likely to prove rewarding for investors.Moneycontrol India :: News :: Omaxe likely to prove rewarding for investors: First Global :: :: IPO - Issues Open :: Omaxe,IPO,First Global

Omaxe: Invest at cut-off

An investment can be considered in the Initial Public Offer (IPO) of Omaxe, a real-estate company with its current revenues comparable to players such as Sobha Developers and Parsvnath Developers.

Competition apart, the company’s ability to bring professionalism in terms of disclosure and transparency could be a vital indicator of the company’s performance.

At the offer price of Rs 265-310, the price-earnings multiple is 18-20 times the company’s consolidated earnings for 2006-07 on the expanded equity base. The offer is at a discount to peers of a similar size.

Further, based on the company’s planned projects and current projects under development, the PE (at the offer price) stands at 10-12 times its likely consolidated earnings two years from now.

Land Bank

Omaxe has declared land reserves of 3,255 acres, representing 150 million sq ft of developable area, mainly in North India, but spread across nine states

Selling Dreams

More so, the company is concentrated more in the National Central Region (NCR), in which it derives almost 73% revenues, and the towering presence of real estate majors like DLF and Ansal properties and Infrastructure, that operate in the same line of business and has a wider acceptance, pose a stiff competition to the company.

Also, one must take into account the rapid spurt in the PAT of the company. In the last one year, it has grown by 75% and considering last four years it has grown at a CAGR of more than 100%.
Valuation

On the valuation front, considering the post-issue equity capital on a fully diluted basis including the green-shoe option, the company quotes a P/E of 19.80(x) and 23.17(x) at the lower and higher end of the price band respectively.

An immediate comparison with its peers like Ansal Housing, Parsvanath Developers and Sobha Developers, which quote a P/E of around 10(x), 26(x) and 43(x) respectively, the scrip’s price looks fair.

Brokerages give thumbs up to Omaxe IPO

Brokerages echo in unison to subscribe to Omaxe Ltd's initial public offering, which opened for subscription Tuesday and close Friday.

Brokerage house SSKI's fair value estimate of Omaxe's NAV comes to Rs 448 per share, which gives a 44 per cent upside from the upper band of the price range of Rs 265-310 per share.

Edelweiss has also recommended subscribing to Omaxe IPO. On net present value basis, Edelweiss has estimated Omaxe's net asset value at Rs 400-405 per share. The IPO price band of Rs 265-310 is at a discount of 51-31 per cent to its NAV.

At the offer price band of Rs 265-310, Emkay Share and Stock Brokers has worked out Omaxe's PE to 17.8-20.8 times 2006-07 (Apr-Mar) EPS of Rs 14.9 (consolidated) on post issue equity of Rs 172.75 crore. According to the brokerage, the company's net asset value stands at Rs 487 per share, which is 57 per cent above the upper band of the price range of Rs 265- Rs 310.

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On the flip side, Omaxe clearly runs geographical concentration risks with its presence largely restricted to the capital and neighbouring states. Notably, these are the very regions where the big boys from the segment, namely DLF and Unitech dominate.

Furthermore, being relatively recent entrants into the land accumulation game, Omaxe’s acquisition costs are bound to be significantly higher, which in turn will yield lesser margins. Finally, the recent run in with the IT authorities and its other cases, raise the spectre of corporate governance related issues.

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Omaxe- seems cheap!

Surprisingly, the Omaxe issue is priced at a discount to its net asset value and a reasonable earnings multiple.

In September 2006, real estate consultancy Trammel Crow Meghraj had carried out a valuation of all the 47 projects of Omaxe aggregating about 140 million sq ft (2,837 acres), and had arrived at a net asset value (NAV) of Rs 19,700 crore. Post-issue, the company will have market capitalisation in the range of Rs 4,214- Rs 5859 crore, which amounts to a meagre 22-30 per cent of the estimated NAV.

“This valuation has not been mentioned in the red herring prospectus following SEBI guidelines which bar real estate players from providing valuations,” said Rohtas Goel, chairman.

From the Archive

Omaxe seeks Rs.600 crore in IPO

Real-estate developer Omaxe Ltd plans to raise as much as Rs 600 crore ($148 million) selling shares for the first time to finance land acquisition and repay loans.

The company will sell 17.8 million new shares of Rs 10 face value at Rs 265 to Rs 310 apiece, starting July 17. The price will be decided based on demand from investors after the sale ends on July 20, the New Delhi-based company said in a statement on Thursday

Retail giants spot big scope in small town mall projects

Real estate majors Unitech, Parsvnath and Omaxe are scouting for greenfield mall projects in smaller towns and cities for a faster roll out of their nation-wide retail footprint

Mutual funds wary about realty

The global funds are gung-ho about the prospects of India's real estate sector and have committed billions of dollars, but the Indian mutual funds are treading cautiously. The fund managers are concerned about overstretched and unjustified valuations of real-estate stocks and are quietly reducing their exposure to them.

Close on the heels of DLF

Close on the heels of the mega public issue of Delhi-based realtor DLF Ltd, Housing Development and Infrastructure Ltd (HDIL), a group company of the Mumbai-based mortgage firm Dewan Housing Finance Ltd, plans to enter the capital market with a public issue of around Rs2,000 crore early July.
Another Delhi-based realtor, Omaxe Developers Ltd, is also expected to hit the market around the same time

According to Delhi-based Prime Database, a primary market data provider, 46 real estate companies have lined up public issues. These include Dubai-based real estate major Emaar MGF (Rs13,000 crore), Omaxe (Rs1,400crore), Bangalore’s Purvankara Developers Ltd (Rs1,300crore), and Sahara Infrastructure and Housing Ltd, the real estate arm of the Sahara group.

Tuesday, July 17, 2007

Omaxe IPO : everybody was positive!