Brookfield India REIT IPO Review – Date, Issue Price, Price Band, Analysis and News
Brookfield India Real Estate REIT IPO would open for subscription on 3rd February, 2021. Brookfield India Real Estate Trust Limited is India’s only institutionally managed public commercial real estate company which is sponsored by an affiliate of Brookfield Asset Management, part of Brookfield Group. Last two REIT IPOs gave handsome listing gains to investors. However, currently, the stock markets are taking corrections. Should you invest in Brookfield India Real Estate REIT IPO Public Issue? What are the hidden factors where an investor should know before investing in this IPO?
Also Read: Axis Greater China Equity Fund NFO – Should you invest?
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 Brookfield India Real Estate Limited
The Brookfield REIT is India’s only institutionally managed public commercial real estate vehicle. Sponsored by an affiliate of Brookfield Asset Management, one of the world’s largest alternative asset managers with approximately US$550 billion in assets under management, as of June 30, 2020, its goal is to be the leading owner of high quality income producing commercial real estate assets in key gateway Indian markets, which have significant barriers to entry
Brookfield India REIT IPO Issue details
| Brookfield REIT IPO – Issue Details | |
|---|---|
| IPO Opening Date | 03-Feb-21 |
| IPO Closing Date | 05-Feb-21 |
| Face Value | Rs 10 per share |
| IPO Price band | Rs 274 to Rs 275 per share |
| Issue Size | Total of Rs 3,800 Crores |
| IPO Lot Size | 200 |
| Lead Managers | Axis Capital, JP Morgan, IIFL Holdings, Kotak Mahindra Capital, SBI Capital, JM Financial and Ambit |
| Listing at | BSE and NSE |
Objects of the Brookfield India REIT IPO Public 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 the existing indebtedness of Asset SPVs
ii) General purposes
Company Financials
Here are the company financials.
| Fin. Year ending |
Total Revenues (Rs in Millions) | Profits after tax (Rs in Millions) |
Profit % |
|---|---|---|---|
| Mar-2018 | 8,662.5 | 1,610.8 | 18.6% |
| Mar-2019 | 9,298.3 | -157.4 | -1.7% |
| Mar-2020 | 9,813.9 | 151.2 | 1.5% |
| 6 Months ending Sep-20 | 4,674.6 | -739.2 | -15.8% |
What are the key competitive strengths of Brookfield India Real Estate Limited?
Here are the key strengths of the company.
1) Global Sponsorship with Local Expertise
2) Difficult to replicate, dominant and strategically located properties
3) Place making capabilities
4) Diversified Blue Chip Tenant Roster and Cash Flow Stability
5) Significant Identified Internal and External Growth Opportunities
6) Experienced, Cycle-Tested Senior Management Team
7) Institutional Corporate Governance Framework and Strong Alignment of Interests
What are the Strategies Brookfield India Real Estate Ltd want to adopt in future?
Here are the key strategies of the company.
1) Leveraging Brookfield and Manager’s Operating Expertise for Proactive Asset and Property Management
2) Capitalize on its Initial Portfolio’s Embedded Organic Growth and On-Campus Development Potential
3) Pursue Disciplined and Accretive Acquisition Growth Opportunities
4) Prudent and Flexible Capital Structure Positioned for Growth
Reasons to invest in Brookfield India REIT IPO
1) Brookfield India Real Estate REIT would be the third REIT IPO Issue that has come up for public subscription in India. REIT is gaining prominence in the recent times, hence investors can tap opportunities in this segment by investing such IPOs.
2) Last two REIT IPOs gave good returns on listing day.
3) Consistent revenue growth in the last 3 years.
Risk Factors / Reasons not to invest in Brookfield India REIT IPO
1) The company has incurred loss in FY2019. Even in FY20, if we remove extraordinary items, the company has incurred losses.
2) Company does not provide any assurance / guarantee of any distribution of profits to the unit holders
3) Company has not executed any binding agreements with respect to share acquisition agreements, call option agreements etc.,
4) Company’s ability to dispose of assets and invest in new investment opportunities is subject to REIT regulations
5) The company has certain liabilities of the portfolio companies and if realized, it would have an adverse effect on results / cash flows of the company
6) The impact of Coronavirus disease could affect its business and the future is uncertain and cannot be predicted.
7) Company profitability is dependent on the performance of commercial real estate market in India. There could be fluctuations in the general economic, market and other conditions which would have an impact on such business.
8) Majority of portion is derived from a limited number of tenants and sectors. In case of any adverse developments affect such tenants or sectors, it would have an impact on company performance.
9) For complete internal and external risk factors, you can refer the DRP of the company.
Brookfield REIT IPO Schedule and listing date
| Brookfield REIT IPO Schedule | |
|---|---|
| Offer Open | 03-Feb-21 |
| Offer close | 05-Feb-21 |
| Finalization of Allotment | 11-Feb-21 |
| Initiation of Refunds | 12-Feb-21 |
| Credit to Demat Account | 12-Feb-21 |
| IPO Shares Listing Date | 17-Feb-21 |
How are REIT company shares performing?
There are two companies which are already listed. Let us check the share price performance of these companies.
1) Embassy REIT trading at Rs 350 (NAV Rs 375). This IPO was listed in Apr-2019 and gave 10% returns from listing day to till date. Last 1 year, the share price dropped by 16%.
2) Mindspace REIT trading at Rs 331 (NAV Rs 358). This IPO was listed in Aug-2020 and gave 10% returns from listing day to till date.
If you observe, these companies are trading at 7% to 8% lower than their NAV prices.
Brookfield REIT has NAV of Rs 311 as of end of Sep-2020. If you go with technical analysis, it should trade at Rs 285 to Rs 295. This would be 5% gains from current IPO Price.
Also Read: Best Largecap Stocks to invest in 2021
Should you invest in a Brookfield India REIT IPO Public Issue?
Brookfield India Real Estate REIT Public Issue is the third REIT IPO that is coming up for public issue in India. Its revenues are showing consistent growth. However, the company has incurred losses in FY2019. Even in 2020, if we remove extraordinary items, it has incurred loss. With Covid-19 uncertainty, such business might see a slowdown the short term, however, it might pick-up in next few years. Current REIT companies share prices have dropped due to covid-19 uncertainty. Considering these facts, investors can stay away from this IPO. I would not get surprised that even this IPO might get oversubscribed as investors are not worried about fundamentals any more.
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I love this sentense “investors are not worried about fundamentals any more” 😀
Embassy REIT and Mindspace REIT are quoting at 7 to 8% discount to their NAV is a surprise and why investors are not paying any attention to this. In this euphoric market, any issue will get over subscribed is not an indicator of good and strong fundamentals of the company.
In this “artificial” bull run, investors would invest loss making companies (e.g. burgerking), would keep away devotion towards nation (e.g. invest in Chinese lead companies like gland pharma) etc and you are talking about investors ignoring companies that has attractive valuations:-)
Are you sure that there is an offer for sale by the selling unit holders?
Hello ro, Even I did has same question in my mind. It is specified in DRHP prospectus. However the amount is yet to be known. I would update this section once I hear more info.