Reeling under acute cash crunch, a clutch of real estate companies are now taking the qualified institutional placement or QIP route and preferential allotment of warrants to promoters to raise the resources to complete their languishing projects or meet their mounting debt obligations. Real estate industry has been witnessing an acute liquidity crunch, which has made it difficult to raise funds, especially through banks. On Monday, New Delhi-based Parsvnath Developers made headway in announcing that its board has approved a proposal to raise up to Rs.2,500 crore. The board has decided to raise funds by various means including through issuance of further securities to persons other than the existing equity shareholders of the company, and also by way of QIP to qualified institutional buyers.
Bangalore-based Puravankara Projects making a similar announcement said that it was exploring options to raise long-term funds including a QIP issue. Market sources indicate that the company is looking to raise around Rs.800 crore from the market.
This announcement comes on the heels of Indiabulls Real Estate's announcement last week about raising Rs 2,656 crore through QIP. On Saturday too, Mumbai-based real estate firm HDIL said it was planning to raise an amount in the vicinity of $600 million through same route
The country's second largest realty firm Unitech had said it would issue warrants worth Rs.1,000 crore to promoters, thereby raising their stake by about 10% in the company. Last month, it had raised Rs.1,600 crore through QIP to fund various projects and pay off part of its Rs.8,400-crore debt. Besides, the promoters of India's largest realty firm DLF had earlier this month sold a 9.9% stake in the company for about Rs.3,860 crore for raising funds.
Meanwhile, other players like Sobha Developers are also believed to be in a process of raising funds through QIP, though the company has not made any announcements on this.
For the cash strapped real estate firms, QIPs came as handy at the right time, as the liquidity crunch was taking a toll on the cash positions of the companies as well as the health of projects underway, and many industry players were on the verge of scrapping future projects altogether.
At the BSE, Parsvnath shares are currently trading at Rs.96.20, up by Rs.7.35 or 8.27% on a volume of 6.24 lakh shares.
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