Sahara realty arm plans to go public, raise $1 billion

Sahara realty arm plans to go public, raise $1 billion
The Economic Times, August 20, 2009, Page 13

IPO To Make Firm Second Most Valuable Player In The Segment After DLF

Abhinaba Das & Kausik Datta MUMBAI

THE Lucknow-based Sahara Group is planning to take its realty arm public and raise up to $1 billion, which, if successful, would make the company the second valuable player in the segment after DLF.

A person with direct knowledge of the development told ET that investment bankers JM Financial, Kotak Mahindra Capital Company and Enam will advise the initial public offering of Sahara Prime City Ltd (SPCL) along with legal firms Amarchand Mangaldas Shardul Shroff & Co, Hirani & Co, Luthra & Luthra and Milbank of UK.

The IPO is expected to hit the market by end of this year, the person said on condition of anonymity. Another person — close to one of the three investment banks — said the group wants to offload 10% of its stake in the wholly-owned company, valuing itself at $10 billion (Rs 49,000 crore) behind DLF which has a market cap of Rs 63,000 crore as on August 19, 2009.

Currently, the second valuable firm in the Indian realty firmament is Unitech with a market cap of Rs 17,000 crore. The draft red herring prospectus for the offering will be submitted in a week, the person said.

A Sahara Group spokesman declined to comment for this story, which was broken earlier in the day by ET Now, this newspaper’s business news channel.

According to a real estate expert, the proposed IPO indicates that the group is refurbishing its real estate business after the Reserve Bank of India (RBI) asked it to pull out of its mainstay parabanking activities over a period of time. RBI has asked Sahara India Financial Corporation not to accept any new deposit which matures beyond June 30, 2011. It has also been asked to stop accepting installments of existing deposit accounts with effect from that date.

The Sahara group had announced its intention to launch a real estate IPO two years ago. SPCL owns a plethora of firms including Sahara City Home, Sahara Star Hotel in Mumbai, Sahara Super Speciality Tertiary Care Hospital in Lucknow and Sahara Grace. It has acquired land of 8500 acres for its township projects. It plans to set up 217 townships, spreading over 100 acres each, in various parts of the country. Of this, the first phase is expected to set up 102 townships while the remaining, in the second phase. The first phase is expected to be over in next five to seven years while it will kick-off the second phase from 2015.

Sahara’s plans aligns with the larger trend in the realty industry, which is crawling out of a market slump. A clutch of real estate companies are in the process of launching IPOs this year in order to cash in on the slow reversal of fortunes in the sector. Emaar MGF, Lodha Developers, Nitesh Estates and Oberoi Constructions are some of the firms waiting this year to launch IPOs. Of this, Lodha Developers’ is expected to be pegged at over Rs 2,000 crore which is value the company at around Rs 20,000 crore.