Indian Stock Market

Brigade Enterprises IPO : Brigade Enterprises IPO Analysis 

Brigade Enterprises, one of the leading real estate development companies based in Bangalore, is coming out with an initial public offering (IPO) of 16,624,720 equity shares of face value of Rs 10 each.

The issue price band has been fixed at Rs 351-390 per equity share and company wants to raise Rs 583.53 crore and Rs 648.36 crore, at respective prices.

The company has also planned greenshoe option of another 2,493,708 equity shares of face value of Rs 10 each. It can raise another Rs 87.53 crore and Rs 97.25 crore, respectively, if greenshoe option exercised.

So the company would raise around Rs 671.06 and Rs 745.61 crore, in total, after the execution of greenshoe option.

The issue comprises a net issue to the public of 16,524,720 equity shares and a reservation of up to 100,000 equity shares for the eligible employees. The equity shares offered through this issue are proposed to be listed on the Bombay Stock Exchange and the National Stock Exchange.

At least 60% of the Issue will be available for allocation to qualified institutional bidders on a proportionate basis, out of which 5% shall be available to mutual funds only. Further, not less than 10% of the issue shall be available for allocation on a proportionate basis to non-institutional investors and not less than 30% of the issue shall be available for allocation on a proportionate basis to retail individual investors. The issue will constitute 16.87% of the fully diluted post issue paid-up capital of the company assuming that the Green Shoe Option is exercised in full and 15% assuming that the Green Shoe Option is not exercised.

The money raised from the issue will be used for the purpose of acquisition of land, construction and development costs in relation to ongoing projects and forthcoming projects and general corporate expenses.

For the year ended March 31, 2007, it has reported revenues of Rs 417.02 crore and net profit of Rs 71.5 crore. It has posted net profit of Rs 44.4 crore on the revenues of Rs 230.7 crore for the six months ended September 30, 2007.

The public issue constitutes 16.87% of the post issue paid up capital of the company (with greenshoe option) and 15% of post issue capital (without greenshoe option). After greenshoe option, the market cap of the company will be Rs 3976.83 crore and Rs 4418.7 crore at respective price band.

Brigade Enterprises focusses on residential, commercial and hospitality properties. The company has land reserves of 395.05 acres spread across seven cities in south India. It is mainly focused on Bangalore and Mysore; looking at diversifying to Hyderabad, Chennai, Kottayam (Kerala), Mangalore, Chikmagalur.

It made payments of Rs 477.65 crore towards the land reserves and is yet to make Rs 227.96 crore before taking further possession.

They have finished 67 projects covering 5.67 million sq ft saleable area. Now the company is developing 12.53 million sq ft saleable land, which includes two integrated lifestyle enclave, 12 residential properties and two hospitality projects.

BE Billimoria, Simplex Infrastructures and Ahluwalia contracts are working as a contactors for the company

Brigade is developing 3 hotels with 700 rooms and 3 resorts with 196 rooms. It will manage operations through tieups with Starwood, InterContinental, Banyan Tree etc.

Its forthcoming properties (properties that are in planning stage, where approvals are in the process of being obtained but construction has not yet begun) include four integrated lifestyle enclaves, 16 residential properties, nine commercial properties and five hospitality properties, aggregating to approximately 23.14 million sq. ft. of Saleable Area and approximately 30.32 million sq. ft. of Developable Area.

The global co-ordinators and book running lead managers to the issue are J P Morgan India Private Limited and Enam Securities Private Limited and the book running lead manager is ICICI Securities Limited