Real estate firms, including market leader DLF, are taking a contrarian view on preferred route for selling promoter shares, as they are opting for Institutional Placement Programme (IPP) as against the much sought-after Offer For Sale (OFS) mechanism.
With just about three and a half months left to comply with Sebi's guidelines for a minimum public holding of 25%, a host of private sector companies are selling shares and a majority of them have opted for OFS route in this regard.
However, when it comes to real estate companies, they are mostly opting for IPP route, where shares can be sold to only institutional investor. In the OFS route, shares can be sold to institutional as well as retail investors.
Among major real-estate companies, the promoters of Godrej Properties
and Prestige Estates Projects have chosen the IPP route to sell their stake. Besides, DLF is expected to go for the IPP route next month to bring their holding below 75%.
The promoters of Puravankara Projects
and Oberoi Realty are also said to be looking to take the IPP route to reduce their respective stakes.
IPP and OFS are the two new share sale tools introduced by the regulator in January last year, especially to help corporates increase their public float. More than 30 comp
anies have already sold shares through OFS route, while only three (all real estate firms) have sold shares through IPP mechanism as yet.
Under OFS mechanism, promoters auction their existing shares to bring down their stake in a company, while IPP route allows promoters to sell up to 10% of their capital through auction to institutional investors.
As per Sebi (Securities and Exchange Board of India) norms, all listed private sector firms are required to have at least 25% public shareholding by June this year.
According to market analysts, real estate companies are going for IPP route as promoters are not willing to sell their shares to certain entities.
"In OFS mechanism, shares are offered to every class of investors, where IPP is a structured deal where only handful of investors can subscribe shares. It means that these realty firms don't want to offload their shares to these investors," CNI Research Head Kishor Ostwal said.
Alex Mathews Head, Research at Geojit BNP Paribas Financial Services said, "In the OFS mechanism, most of the companies sell their shares either to current market price or at discount so in the IPP route they could be getting good price."
Godrej Properties, the first company to opt for IPP route, alloted 81.86 lakh shares in March in a deal valued at Rs 470 crore. Prestige Estates Projects had alloted 21.92 lakh equity shares worth Rs 364 crore.
However, the promoters of Prestige Estates Projects still hold 80% stake in the real estate firm, above the Sebi's threshold limit.
Additionally, DLF would issue over eight crore fresh equity shares or 4.7% stake, worth more than Rs 2,000 crore, to meet Sebi's guidelines on minimum public shareholding.
The fresh equity of shares would lead to reduction in DLF's promoters stake to below 75% from the present 78.58%.
Puravankara Projects, wherein promoters have around 90% stake in Bangalore-based builder, is said to be planning to offload 15% holding via IPP mechanism to adhere to Sebi's regulation.
Besides, Oberoi Realty, where promoters holds 78.49% holding in the company is said to be looking to sell shares to comply with Sebi's rules.