With the stock markets in a volatile phase due to uncertainty Blackstone-sponsored Nexus Select Trust has decided to play it safe and price its initial public offering conservatively - at a 22 per cent discount to the net asset value of the units.
The price band for the REIT’s IPO is in the range of ₹95 to ₹100 per unit.
Chief Executive Officer Dalip Sehgal said that the pricing, decided by them in consultation with the investment bankers, ensures that there is enough potential for gains for investors. “We believe this being India’s first retail REIT there should be enough for the investor in terms of returns,” he said.
Based on the pricing, investors would get ongoing return of 8.3 per cent pre-tax and 7.1 per cent post-tax in terms of the distributions made by the REIT.
The projected annual net profit growth in the near term is 8-9 per cent and Sehgal said that this would potentially translate into a commensurate upside for the investor every year as capital appreciation.
Besides the return to investors, another reason for the conservative pricing could be the uncertain market environment which is not conducive to fund raising.
The IPO market has turned bearish in recent months and a few prospective issuers have withdrawn their draft prospectus citing uncertain market conditions.
From January 1 to date in 2023 only six companies have hit the market with their primary offerings worth ₹1000-odd crore. Listing gains have been muted.
Talking to businessline on the sidelines of a media briefing by Nexus Select Trust, Raj Balakrishnan the Co-Head of Investment Banking in India for BofA Securities said that they would be watching the outcome of the REIT IPO in the market as well as that of Mankind Pharma to gauge the response. He agreed that the IPO market had turned sluggish at the moment.
Nexus Select will be open for subscription from May 9-11 and is expected to list on May 19.
Bulk of the offer-for-sale component amounting to ₹1,800 crore is from the main sponsor Blackstone. Arjun Sharma, the chairman and promoter of Select CityWalk, which will become part of the mall portfolio on listing, said that he had decided not to participate in the OFS as he felt that the REIT had strong prospects for growth with consumption expected to be strong.