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Mindspace Business Parks REIT IPO opens today, should you subscribe to the issue?

Mindspace Business Parks REIT, which is owned by K Raheja group and Blackston, has raised Rs 2,644 crore from anchor and strategic investors

Aseem Thapliyal | July 27, 2020 | Updated 12:44 IST
Mindspace REIT IPO opens today, here's what analysts say
Mindspace Business Parks REIT, which is owned by K Raheja group and Blackston, has raised Rs 2,644 crore from anchor and strategic investors

The initial public offer (IPO) of Mindspace Business Parks REIT hit the capital market today. The IPO through which the firm plans to raise Rs 4,500 crore will close on July 29. Ahead of the public issue, Mindspace Business Parks REIT, which is owned by K Raheja group and Blackston, has raised Rs 2,644 crore from anchor and strategic investors.

The firm raised Rs 1,518.74 crore from anchor investors and Rs 1,125 crore from strategic investors. The price band for the ongoing public issue stands at Rs 274-275 per share. Mindspace Business Parks REIT plans to raise up to Rs 1,000 crore through issue of fresh units and up to Rs 3,500 crore through offer for sale.

In a regulatory filing late Friday, Mindspace said the REIT Offer Committee of  he governing board of K Raheja Corp Investment Managers LLP finalised allocation of 5,52,27,200 units at Rs 275 per unit to anchor investors.

The total proceeds from anchor investors is Rs 1,518.74 crore. The Singapore government, Fidelity and Nomura Trust, HSBC Global, Capital Income Builder and Cohen & Steers are among major investors. The panel also finalised allocation of 4,09,09,000 units to strategic investors at Rs 275 per unit.

Mindspace has fixed the price band for its public issue at Rs 274-275 per unit. Mindspace filed the final offer document with market regulator SEBI last week. Shares in the IPO are available in a lot size of 200.  Market cap of the firm is expected at Rs 23,675 crore post the IPO.

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As per the offer document, Mindspace Business Parks REIT aims to raise up to Rs 1,000 crore through issuance of fresh units and up to Rs 3,500 crore through offer for sale. Last year, Embassy Office Park REIT, the country's first REIT issue, raised nearly Rs 5,000 crore.

This will be the second public issue of Real Estate Investment Trust (REIT) in India.

Last year, Embassy Office Park REIT, the country's first REIT issue, raised nearly Rs 5,000 crore. Choice Broking said, "At the higher price band of Rs 275 per share, MBP REIT's unit is  valued at 87.1% of its net asset value (NAV), as compared to Embassy Office Parks (EOP) REIT, which is  trading at 98.1% of its NAV." The brokerage assigned "Subscribe with Caution" rating for the IPO.

Yash Gupta, Equity Research Associate at Angel Broking said,"Current dividend yield works out to .5% for Mindspace REIT (M-REIT), which is projected to increase to 7.5% in FY22E. Though uncertainties due to Covid-19 related issues pose risks to earnings in the near term, we believe that in the long run, there will be a steady increase in earnings. Post the IPO, there will also be a debt reduction of Rs 3,000 crore for the company, which will bring down debt to equity ratio from 2.95 times at the end of FY20 to below 1.0 times, which is a key positive. Despite near-term uncertainties due to Covid-19, we believe that in the long run, the REIT will offer similar or better post tax yields as compared to fixed income. Steady and growing dividend stream along with capital appreciation of underlying assets makes it an attractive investment opportunity in the long run. We recommend 'Subscribe' to the issue from a long term investment perspective."

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