Mindspace Business Parks REIT IPO Analysis Review
Mindspace Business Parks REIT IPO date is 27 July, 2020. Very few of us might be aware about REIT Investments. Mindspace Business Parks is the owner of a high quality office portfolio in India that serves as essential corporate infrastructure to multinational tenants and has significant embedded growth prospects. First REIT IPO came 15 months back (Embassy REIT) and now this is the second REIT IPO investment in India. Should you invest in Mindspace Business Parks REIT IPO? Let me do Mindspace REIT analysis in this article.
What is REIT in India?
If you are already aware about REITs, skip this section.
The REIT is like a mutual fund scheme. Mutual Fund invests in stocks and debt instruments. However, REIT pools money from investors and invests in income producing real estate properties. Means investors are indirectly investing in real estate properties.
In simple terms, here is how REIT works:
Investors invests in REIT à REIT Manager invests in Real Estate Properties à Rent Received / Capital Appreciation on assets à REIT Manager/Trust à Distribute dividend income/Rental income/Interest Income/Capital gains to Investors.
If you would like to know more about REIT, you can watch this video.
About Mindspace Business Parks Limited
Mindspace Business Parks has a quality office portfolio in Mumbai, Hyderabad, Pune and Chennai.
Its portfolio has Total Leasable Area of 29.5 msf and is one of the largest Grade-A office portfolios in India. Their Portfolio comprises 23.0 msf of Completed Area, 2.8 msf of Under Construction Area and 3.6 msf of Future Development Area, as of March 31, 2020. Their portfolio has five integrated business parks with superior infrastructure and amenities (such as restaurants, crèches and outdoorsports arenas) and five quality independent offices. Its assets provide a community-based ecosystem and believe that they have been developed to meet the evolving standards of tenants and the demands of “new age businesses”, which makes them among the preferred options for both multinational and domestic corporations.
Mindspace REIT IPO Issue details
IPO opening date: 27-July-2020
IPO closure date: 29-July-2020
Issue price band: Rs 274 to Rs 275 per unit.
Issue size: Upto 4,500 Crores
IPO Lot size: 200 units and in multiples of 200 units, there-off.
Minimum investment: Rs 55,000 on the higher price band
Leading Managers: Morgan Stanley, Axis Capital, DSP Merrillynch, Citigroup Global, JM Financial, Kotak Mahindra Capital etc.
Listing: BSE / NSE
Mindspace REIT DRHP Prospectus.
Objects of the Mindspace Business Parks REIT Public Issue issue
The offer comprises of fresh issue and offer for sale:
1) Offer for sale – The net proceeds would go to the selling shareholders, the company would not get any proceeds from this.
2) Fresh issue – Here is how the proceeds would be used:
i) Partial or full pre-payment or scheduled repayment of certain debt facilities of the Asset SPVs availed from banks/financial institutions (including any accrued interest and any applicable penalties/ premium);
ii) Purchase of NCRPS of MBPPL
iii) General purposes
Company Financials (Reinstated)
1) The company generated revenue of Rs 1,435.4 Crores for the year ended Mar-17 and Rs 2,026.2 Crores for the year ended Mar-20.
2) The company posted a profit of Rs 231.3 Crores for the year ended Mar-17 and profit of Rs 513.9 Crores for the year ended Mar-20.
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What are the key competitive strengths of Mindspace Business Parks Limited?
Here are the key strengths of the company.
1) Diversified and quality tenant base
2) Strong industry fundamentals
3) Experienced management team with KRC group support
4) Stable cash flows
What are the Strategies of Mindspace Business Parks Ltd?
Here are the key strategies of the company.
1) Increase NOI through its Portfolio’s embedded organic growth as well as through on campus development
2) Achieve growth through value accretive acquisitions.
Reasons to invest in Mindspace Business Parks REIT Public Issue
1) Mindspace REIT would be the second REIT IPO Issue that has come up for public subscription in India
2) Consistent revenue growth in the last 3 years. Its revenues increased from Rs 1,435 Crores in FY2017 to Rs 2,026 Crores in FY2020.
3) Good margin growth in the last 3 years.
Risk Factors / Reasons not to invest in Mindspace Business Parks Ltd IPO/Public Issue
1) During covid-19, majority of the IT and MNC and other category of employees are working from home. Companies started thinking to get rid of office spaces owning to this as it could go for medium term.
2) The Formation Transactions, ROFO arrangement and the management framework of the Portfolio will be given effect to after the Bid/Offer Closing Date. Any inability to consummate transactions in relation to management of the Portfolio, ROFO arrangement and the Formation Transactions will impact the Offer and its ability to complete the Offer within the anticipated time frame or at all.
3) They will assume liabilities in relation to the Portfolio and these liabilities, if realised, may adversely affect its results of operations, cash flows, the trading price of the Units and its profitability and ability to make distributions.
4) They may not be able to make distributions to the Unitholders in the manner described in this Offer Document or at all, and the quantum of distributions may decrease.
5) The REIT Regulations require us to adhere to certain investment conditions, which may limit thier ability to acquire and/or dispose of assets. Regulatory framework governing REITs in India has been recently promulgated and is relatively untested.
6) The COVID-19 pandemic adversely affects its business, financial condition, results of operations, cash flows, liquidity and performance, and it may reduce the demand for commercial real estate in future.
7) Its business and profitability depends on the performance of the commercial real estate market in India. Any fluctuations in market conditions may have an adverse effect on its business, results of operations and financial condition.
8) A significant portion of its revenues are derived from a limited number of tenants. Any conditions that impact these tenants could adversely affect its business, results of operations and financial condition.
9) For complete internal and external risk factors, you can refer the DRP of the company.
How is Embassy REIT IPO performing?
You would get doubt, what about Embassy REIT IPO performance that came 15 months back for listing.
1) This IPO was priced at Rs 300.
2) The units were trading at a Rs 460 (150 % premium) till pre-covid March 1st week, 2020
3) These are trading now at Rs 360 (20% premium). The majority of the gains have come only in the last few days which could be owning to the 2nd REIT public issue buzz.
Also Read: What are equity mutual funds?
Should you invest in a Mindspace Business Parks REIT Public Issue?
Mindspace Business Parks REIT Public Issue is the Second REIT IPO that is coming up for public issue in India. Its revenues and profits are showing consistent growth. While REIT concept emerged few years back, the first REIT IPO came 15 months back. With Covid-19 crisis going on, majority of the IT and MNC companies are planning to allow their employees to continue to work from home the way they are doing today. In this situation, the REIT concept might get diluted and there are very limited chances that investors would get benefitted. I would personally like to stay away from such high risk investments where there is limited scope of appreciation as of today. In future if the covid-19 situation improves and we get clarity about REIT investments, one can think of investing in such investment options.
Disclaimer: I do not have interest in investing in this REIT Issue and above analysis is based on my personal views. The idea of giving positive and negative factors to investors in this article is to create awareness and education about this issue. One should NOT constitute this as investment advice to buy or not to buy. Please consult your investment advisor before you invest in such high risk investment options.
Readers, what is your view about Mindspace REIT analysis? Are you still willing to invest in this REIT issue?
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