Puravankara's $100M QIP: Boosting Growth, Cutting Debt in Real Estate

Bengaluru-based real estate developer Puravankara Limited is preparing to initiate a qualified institutional placement (QIP) to raise between ₹700-800 crore, according to sources familiar with the company's strategy.

On July 12, Puravankara share price increased by 2.26%, reaching ₹480.90, following a 39% rise in customer collections to ₹965 crore in Q1 FY25, up from ₹696 crore in Q1 FY24.

Established in 1975, Puravankara operates under three major brands: Purva, Provident Housing, and Purva Land. As of March 31, 2024, the company has completed 86 residential and commercial projects totaling approximately 50 million square feet. It also holds a land bank exceeding 36 million square feet and has over 23,000 homes with a combined area of more than 31 million square feet under development. Recently, Puravankara entered the redevelopment market in Mumbai, acquiring rights for two housing societies covering three acres with a potential gross development value of ₹1,500 crore.

"Puravankara has appointed ICICI Securities as one of its advisors for the QIP and plans to add one or two more banks. The company is awaiting shareholder approval for its fundraising plans, expected in the next few days, but the deal launch is likely next month, following the union budget," one source mentioned.

The real estate firm intends to utilize the funds for both organic and inorganic growth opportunities, including capital expenditures and debt reduction. As of March 31, Puravankara's net debt was ₹2,151 crore, up from ₹1,741 crore at the previous quarter's end.

Puravankara is seeking shareholder approval to raise up to ₹1,000 crore through a postal ballot, which concludes on July 14. If the QIP proceeds, Puravankara will be the fifth real estate company to raise equity through the stock markets this year.

In 2024, Mumbai-based real estate developers have led the way, with Lodha Group (Macrotech Developers Ltd) raising ₹3,300 crore through a QIP in March. The same month, D B Realty secured ₹920 crore, and Rustomjee (Keystone Realtors Ltd) raised ₹800 crore in May. Real estate construction firm Capacit’e Infraprojects garnered ₹200 crore from a QIP in January.

These QIPs primarily aimed at securing growth capital and reducing debt on company balance sheets, highlighting a shift in real estate firms' reliance on debt and alternative capital sources for growth. This trend of QIPs also reflects increased investor confidence in the real estate sector's growth prospects.

According to a report by PropTiger.com, as reported by Moneycontrol on June 28, sales and new supply grew by 8% and 11% year-on-year, respectively, across eight major cities in India. This growth was driven by real estate markets in western India, with Pune, Mumbai, and Ahmedabad accounting for 61% of the share in Q2 of CY2023.