Foreign investors lapped up $553 million, 10% in Indiabulls Real Estate

Foreign investors are aggressively renewing their interest in the Indian real estate sector. Overseas investors such as Fidelity, HSBC, TPG and Moor Capital on Monday lapped up the entire $553-million (Rs 2,656 crore) share sale issue of Indiabulls Real Estate (Ibrel).

Overseas investors bid for thrice the shares offered by Ibrel, as the outlook for the Indian real estate sector seemed to be improving. HSBC and Fidelity added to their existing stake in the company, while TPG and Moor Capital joined other investors.

While US-based Fidelity bought $50 million (Rs 240 crore) worth of shares, the UK's HSBC and private equity major TPG bought $300 million (Rs 1,440 crore) and $200 million (Rs 960 crore) worth of shares, respectively, investment banking sources said.

Ibrel received subscription worth $2 billion (Rs 9,400 crore) from investors when it opened the issue on Monday. It sold 143.59 million shares at Rs 185 a share to investors, the company told the Bombay Stock Exchange today. The issue price was 6 per cent lower than Monday's price of Rs 197.50.

The promoters have diluted their stake in the company by 10 per cent, bringing it down to 16 per cent now. Foreign institutional investors hold 37.14 per cent, as on March 31, of which HSBC and its entities own 8.28 per cent and Fidelity owns 1.94 per cent.

Foreign investors are lapping up stocks of Indian property developers in share sales. The BSE Realty Index, which tracks property stocks, went up 53 per cent in the past month. In mid-April, Unitech Ltd, the country's second-biggest real estate developer, raised $325 million (Rs 1,625 crore) from selling new shares to investors such as HSBC, Prudential, Och-Zif, Orient Global and Sandstone Capital in a qualified institutional placement. Last week, the promoters of DLF, the country's largest property developer, sold a 9.9 per cent stake to investors from Capital International, HSBC, Fidelity, Euro Pacific Growth Fund and Copthall Mauritius Investment for Rs 3,860 crore.

"FIIs are interested in those stocks which are under-owned and bullish on sectors such as real estate, banking and infrastructure, which will grow on stability," said Gagan Banga, Indiabulls director.

According to S Subramanian, head of Investment Banking at Enam Securities, nearly $1 billion (Rs 5,000 crore) of institutional money is expected to be invested in Indian equities in the next six months, of which $500 million (Rs 2,500 crore) is expected to flow into realty stocks.

"Investors have different risk appetite and, accordingly, companies are appreciated. Our strategy is that we want to raise capital from long-term investors, as against short-term funds," said Banga.

Analysts said foreign investors were bullish about Indian stocks, especially in the backdrop of signs of a stable government and likely reforms that are expected to follow.

"FIIs believe in the long-term Indian story. Since valuations were low, they wanted to invest in and capitalise later. Real estate stocks will be re-rated once more money comes in and debt levels reduce," said an analyst from a Mumbai-based brokerage, who did not wish to be identified.