Budget 2020

Brookfield REIT IPO sees strong demand, subscribed 7.9 times on Day 3

NEW DELHI: The initial public offer (IPO) of Brookfield India Real Estate Trust was subscribed 7.9 times on the final day of the bidding process today, making it the third-ever successful REIT IPO in India.

The issue received applications for 60,59,44,400 units by 5:00 pm. The quota reserved for retail and corporate investors was subscribed 11.7 times, while institutional investors bid 4.78 times the reserved units.

“The stellar response to the Brookfield REITs IPO demonstrates investors’ confidence in India’s commercial real estate segment. The response to the IPO will help quell fears if any in the mind of investors on the outlook for Indian commercial real estate assets,” said Krish Raveshia, CEO at Azlo Realty.

Analysts were mixed on the issue, with some advising to subscribe for the long term, while others were neutral on it given the uncertainties, weak financials and high debt on the book.

Yash Gupta of Angel Broking had said prior to the launch of the issue that due to the current uncertainties around Covid-19 and proliferation of work from home, he expects demand for commercial real estate to be muted.

“Though the REIT has incurred losses in FY20 and has not paid out any dividends, they expect to pay a yield of 7.5 per cent in FY23, which we believe is aggressive and may be difficult to achieve,” he said.

“The REIT instrument is most popular in global markets, where REITs usually invest in ready-to-use or leased-out property acquisitions and reduce gestation periods. Notably, REITs must be looked at from a cash flow perspective and Brookfield REIT generated cumulatively Rs 1,140 crore FCF through FY18-1HFY21,” said Vikas Jain, Analysts at Reliance Securities.

He added that given substantial reduction in debt level after fundraising, he expects savings on finance cost, which should aid the company to generate positive net distributable cash flows from 2021-22 onwards. Jain had recommended ‘subscribe’ from a long-term perspective.

The REIT includes five properties in Mumbai, Delhi-NCR and Kolkata that yielded Rs 455.14 crore in the first six month of this fiscal.