Embassy Office Parks REIT Public Issue – India’s First Real State Investment Trust IPO

Embassy Office Parks REIT Public Issue, What is REIT, Issue Details, Objective, Key Strength, Reasons to invest, Key challenges & Should you invest?

REIT is an acronym of Real estate company embassy group is all set to launch on 18th March 2019 the initial public offering to raise funds around Rs 4,750 crore

Many of you must not be aware of the REIT units or investment.

The book running lead managers to the issue are Axis Capital, Credit Suisse Securities (India), Deutsche Equities India, Goldman Sachs (India) Securities, HSBC Securities and Capital Markets (India), IIFL Holdings, JM Financial and Nomura Financial Advisory & Securities (India).

Embassy office parks are the owners of the high-quality office portfolio in India that cater as corporate infrastructure to multinational tenants and has significant implanted growth benefits.

If you are seeking information regarding the Embassy Office Parks REIT IPO process, then I would say you the are at the right place

in this post, you can fetch the complete details regarding the Embassy Office Parks REIT IPO which covers as the following

What is Reit in India? How does Reit work, What are the pros and cons of real estate Investment trust? should you invest in Embassy Park REIT Public issue office (MARCH 2019)

Let’s discuss

What is a REIT in India?

REIT is a real estate Investment trust, it is a type of company which function like mutual funds

what mutual fund does is pool money from various investors to invest in income-producing real estate properties.

REIT raises funds from several investors to invest in income-producing real estate properties.

It can be a good opportunity for retail investors/small investors to participate in the real estate market without directly investing in real estate properties.

Properties listed through a REIT are typically commercial assets that can generate stable and high yielding rental income. Even government-run buildings can be placed under REITs.

About Embassy Office Parks Limited

They are the owner of the higher quality office portfolio in India that serves as a corporate infrastructure to multinational tenants and has significant embedded growth prospects.

They expect to be first listed REIT in India upon the listing of Units on the Stock Exchanges and believe that there is no other office portfolio of comparable scale, diversity, and quality in India today. Over the last two decades, India has emerged as a leading services hub for global corporations, due to its large talent pool and cost advantage of high-value services.

About REIT IPO

The price ban for embassy parks office REIT IPO is fixed at 299-300 per share. The 12.91 crore unit issue, made through the book-building process, will constitute at least 10 percent of the issued and paid-up units on a post-issue basis.

The minimum bid size is 800 units and in multiples of 400 unites thereafter.

Not more than 75 percent of the issue, excluding the strategic investor portion, will be available for allocation on a proportionate basis to institutional investors, it said. However, the company may opt to allocate up to 60 percent of the institutional investor portion to anchor investors. For non-institutional investors, the same stands at not less than 25 percent.

The issue comprises allocation to strategic investors of 2.92 crore units worth Rs 876.26 crore and net issue size of Rs 3,873.73 crore.

Strategic investors are American Funds Insurance Series – New World Fund, American Funds Insurance Series – Global Small Capitalisation Fund, Capital Group New World Fund (LUX), New World Fund Inc and Smallcap World Fund Inc.

Embassy Office Parks REIT Public Issue Detail

  • REIT IPO opening date: 18-Mar-2019
  • REIT IPO closure date: 20-Mar-2019
  • Face Value: Rs 0 per share
  • Issue price band: Rs 299 to Rs 300 per share/unit.
  • Issue size: 4,750 Crores to Rs 5,000 Crores
  • REIT IPO Lot size: 400 shares and 400 shares, there-off. The minimum order is 800 shares
  • Minimum investment: Rs 2.4 Lakhs on the higher price band (SEBI REIT guidelines say Rs 2 Lakhs for Retail, however, 800 units would arrive at Rs 2.4 Lakhs).
  • Leading Managers: Axis Capital, Credit Suisse, Deutsche Equities, Goldman Sachs, HSBC Securities, IIFL Holdings, JM Financials, Nomura Financial Advisory
  • Listing: BSE / NSE

How does a REIT work?

  • REIT collect the money from the investors and the money is invested in the rent-generating properties
  • Properties generate rental income every day
  • REIT will distribute the rental income among the investors
  • The capital value of the properties may also raise over a period of time
  • The NET asset value of the REIT units may raise depending on the capital appreciation
  • The investors can also opt for the sale of units to gain loss in the secondary market

SEBI’s Guidelines on REITs:

  • The minimum size of REIT should be 500 crores
  • the initial public offering size should be a minimum of Rs 250 crore
  • the minimum subscription amount to an IPO is 2 lakh for a retail investor
  • The minimum public holding should be 25% in a REIT
  • Initially, REIT is permitted to invest only to invest in commercial properties and 80% of the rent should be invested in rent-generating properties.
  • The left 20% can be invested in the under construction projects, cash, real estate companies’ stocks etc.,
  • 90% of the distributable cash flow must be distributed with the unitholders
  • Net asset value will be declared within 15 days of the valuation

Investments in REITs & Tax Implications

  • The dividends dispersed by the REIT are tax-free in the investor’s hands.
  • Reit will pay the dividend distribution tax
  • REITs will be listed on the stock exchanges. The tax on Long Term Capital Gains incurred by the investors when they sell the units (REIT units) after 3 years of holding is 10% if the LTCG is in excess of Rs 1 lakh.
  • The short term capital gains on the sale of the unit held for less than 3 years will be taxed at 15%

Objects:- Embassy Office Parks REIT Public Issue

The prime object of the embassy REIT shall be to make the investment as a real estate investment as allowed in terms of REIT regulation

The investment of the Embassy REIT 61 shall only be in accordance with the REIT Regulations, including in such holding companies, special purpose vehicles or real estate properties (whether completed or otherwise), securities in India or transferable development rights as permitted under the REIT Regulations.

The principal investment objective of the Embassy REIT is to own un and invest in rent or earnings generating office real estate and related assets in India in accordance with the REIT Regulations.

The Trustee shall make certain that the Capital Contribution (as defined in the Trust Deed) and other REIT Assets (as defined in the Trust Deed) shall be deployed solely for the aim of making investments as stated above and for incurring the REIT Expenses (as defined in the Trust Deed), in following with the REIT Regulations.

How is the company doing in terms of financial?

It is pertinent to gauge the financial strength of any company to believe its position

  • The company produces revenue of 1575 crore for the year ended March 16 and profit of 256.9 crores for the year 2018. Its revenues are Rs 1,493 Crores for 9 months ended Dec-2018.
  • The company revealed a profit of Rs 93.1 crore for the year ended March-16 and profit of Rs 256.9 Crores for the year ended Mar-18. It posted a profit of  Rs 212.1 Crores for 9 months ended Dec-2018.

What are the key strengths of Embassy Office Parks Limited?

  • One of the leading names for top-notch services for the global corporates
  • best in class office properties with commendable infrastructure
  • Highly experienced management team
  • Renowned sponsors with global expertise and local knowledge
  • Highly occupied by a diversified, high quality, ‘sticky’ multinational tenant base.

Reasons to invest in Embassy Office Parks REIT Public Issue

Let’s now understand the Pros & cons of investing in REITs.

What are the benefits to invest in Embassy office parks REIT public issue

  • Transparency-It is regulated by the security exchange board of India like mutual  funds, REIT will be managed by the professional managers
  • Hassle free
  • Diversification
  • liquidity
  • Value of the properties held by REIT can go up leading to a capital appreciation This will increase the NAV of the REIT units.

REITs & Challenges :

  • SEBI has set the minimum subscription amount for a retail investor at Rs 2 Lakh. This is an obstruction for the small investors
  • The real estate sector can get collapsed and you may not get the regular income on the
  • Another key challenge would be, ‘the property valuation process.’ There are no proper standards, procedures or benchmarks in India for property valuations.

Should you invest in Embassy Office Parks Ltd REIT Public Issue?

The main concern among the investor is whether they should consider pooling their money or not?

The revenues and profits are showing consistent growth, however, these may not be considered as a new investment would keep fetching higher or greater returns.

Dividend return might be between 5% to 8% and don’t expect anything much beyond this. Capital gain is also be limited to a single digit.  REITs concept is still up-to-the-minute and new and yet to get to some acceptance.

Unless you are clear on where you are investing, you should stay away from such investments as of now. High-risk investors who understand how REIT work and want to compromise on single-digit returns with a long term perspective can invest in this REIT issue.

Final Words

I hope you had a great time reading about the Embassy Office Parks REIT IPO. The above analysis is based on personal views.

It is our duty to give the investor a fair idea regarding the positive and negative factors to the investor to create awareness about this issue.

I would like to suggest that please consult your advisor before you make any investment in such high-risk investment option

Readers, would you like to invest in this REIT Issue?

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Thanks for Reading and have a wonderful day ahead:)

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