The Rs 4,500-crore IPO of Mindspace Business Parks REIT has been received very well by investors as the bidding ended July 29. The public issue has been subscribed 12.96 times, receiving bids for 87,78,24,600 units against an offer size of 6,77,46,400 units, data available on exchanges showed. The offer size has been reduced to Rs 1,856.26 crore as the K Raheja Corp and Blackstone Group-backed company has already garnered Rs 2,643.74 crore from strategic and anchor investors.
Mindspace REIT public issue consists of a fresh issue of Rs 1,000 crore and an offer for sale of Rs 3,500 crore. The reserved portion of institutional investors has seen subscribed 10.61 times and that of non-institutional investors 15.77 times. "The oversubscription of the Mindspace REIT IPO demonstrates that a) there is a demand for a product like REITs to be a part of investor portfolios and b) commercial real estate continues to have the strong backing of both HNIs and institutions," Sharad Mittal, CEO at Motilal Oswal Real Estate Fund said. The success of this IPO shall also bodes well for future investments in the sector which have dried up post the spread of the COVID pandemic, he said.
Mittal feels investors can earn a return of 11-12 percent of which 7-8 percent which accrues from rental yield is as stable as debt. "Combining the stability of debt and upside of equity, REITs are a must-have in any investor portfolio." The issue saw a far better response than Embassy Office Parks REIT's Rs 4,750-crore IPO, which was subscribed 2.57 times in March 2019. And the reasons could be the quality office portfolio managed by the company in four key markets —Mumbai, Hyderabad, Pune and Chennai—and the reduction in lot size by the Sebi in April 2019.
Mindspace REIT is the owner of a high-quality office portfolio in India that serves as an essential corporate infrastructure to multinational tenants and has significant embedded growth prospects. Mindspace portfolio consists of five integrated business parks with superior infrastructure and amenities and five quality independent offices aggregating to 29.5 million square feet of total leasable area.
Its portfolio assets are well diversified across 172 tenants with no single tenant contributing more than 7.7 percent of the Gross Contracted Rentals. Approximately 84.9 percent of the Gross Contracted Rentals were derived from leading multinational corporations and approximately 39.4 percent from Fortune 500 companies (as on March 31, 2020). Mindspace has a high-quality tenant base with 92.0 percent Committed Occupancy along with long-term contracted rentals which provides long-term visibility of its revenue.
"In the current low-interest regime, REIT is an attractive investment asset class given its fixed dividend income option. REITs must have to pay out at least 90 percent of their net distributable cash flows to stockholders as dividend and that is an attractive investment proposal amid declining interest rate regime," Ashika Stock Broking said. "On FY21 financials shared in the RHP, the yield works out to about 7.5-8.0 percent, on issue price of Rs 275 per unit and there is further scope of growing in the yield with new lease/release offering and an average escalation of 15 percent from a three-year perspective hold good investment for investor who are seeking certainty in returns. Hence, we recommend investors to subscribe the IPO for long term investment perspective," it added.
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