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Oberoi Realty Ltd - IPO Note

Issue Opens on: Wednesday – October 06, 2010
Issue Closes on: Friday – October 08, 2010
Bid Lot: 20 Equity Shares
Price Band: Rs.253 to Rs.260
No. of Shares: 39,562,000 shares
Issue size: Rs 1,000.92-1,028.61 cr

Oberoi Realty Ltd. (ORL) an esteemed brand and leading real estate developer primarily operates in Mumbai. Backed by suave brand and successful track record; ORL has successfully completed 33 projects and developed 5.02 mn sq. ft. of saleable area since its incorporation in 1983.

ORL plans to complete 24 projects (20.3 mn sq. ft.) over the next 3-5 years. This is approx. 4 times of its completed work till date and will significantly contribute to company’s profitability and cash flows going forward. Considering ORL focuses on premium projects, margins are expected to remain high backed by strong pricing.

Despite experiencing severe downturn over past 2 years, ORL’s Balance Sheet (BS) has remained stealthy. This can be gauged from the Zero debt Status and strong cash position on its BS as on 30 June 10. Moreover, ORL can leverage its BS to take advantage of favorable business cycles and market opportunities unlike its several peers which are still reeling under debt overhang. Moreover, all of ORL’s development sites which are owned are fully paid for, which mitigates one of the primary risks involved in project development.

In Jan 2007, SSIII (Co. owned by real estate fund advised by wholly owned subsidiary of Morgan Stanley) invested Rs 6,750 cr in ORL for a stake of 10.76% in the company.

CRISIL has graded the IPO 4/5 which indicates above average fundamentals relative to industry.

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