What you should know about the IPO of Nexus Select Trust REIT

Nexus Select Trust is India's leading real estate investment trust, which represents the real estate portfolio of the globally reputed Blackstone Group. Incidentally, Blackstone is one of the largest institutional investors in the Indian real estate space and has been looking to monetize it through the REIT route. That is what Nexus Select Trust is all about. It is India's leading consumption centre platform with 17 Grade-A best-in-class Urban Consumption Centres spread across 14 cities. These are commercial properties where the investment is re-issued to investors through an IPO in the form of REIT units and then benefits like rents and capital gains are passed on to them as dividends. In India REITs were permitted about 10 years but have taken off only since 2018. They are like mutual funds, but instead of holding equities and bonds, they hold interest in commercial properties.

The total leasable area for Nexus Select Trust REIT across these 17 properties is 9.8 million SFT. This includes 2 hotel assets comprising of 354 keys and 3 office assets comprising of 1.30 million SFT of leasable space. In any REIT, it is the mix of tenants that matter a lot. Here the sectoral split of tenants includes sectors like apparel, accessories, hypermarkets, entertainment, and F&B. Currently, Nexus Select Trust serves across 14 cities in India and these include some of the fastest growing urban centres like Delhi, Navi Mumbai, Bengaluru, Pune, Hyderabad, and Chennai. These account for 30% of India's total discretionary retail spending. In India REITs are permitted only on commercial property and not in residential property, as per extant SEBI regulations.

Highlights of the IPO issue of Nexus Select Trust REIT

The IPO of Nexus Select Trust REIT will include an offer for sale (OFS) and a fresh issue. The fresh issue component entails the issue of 14 crore REIT units. The price band of the REIT issue has been fixed in the range of Rs95 to Rs100. So, at the upper end of the band, the fresh issue size is worth Rs1,400 crore. The OFS entails the sale of 18 crore REIT units which at the upper end of the price band of Rs100 works out to Rs1,800 crore. Thus, the total IPO will entail the issue of 32 crore REIT units which is worth Rs3,200 crore at the upper price band of Rs100. The issue will be managed by BOFA Securities, Axis Capital, Citigroup, HSBC Securities, IIFL Securities, JM Financial, JP Morgan Kotak Mahindra Capital, Morgan Stanley India and SBI Capital. The registrar to the issue is KFIN Technologies Ltd.

As stated earlier, the Nexus Select Trust represents the commercial real estate interest of Blackstone Group in India. The idea here is to indirectly monetize the realty holdings in the franchise and issue it as units to the public.

As per the terms of the offer, 75% of the net offer is reserved for the qualified institutional buyers (QIBs), while 25% of the total issue size is reserved for the HNI / NII investors. The company par value will be announced shortly and the REIT of Nexus Select Trust will be listed on the NSE and on the BSE. Being a fresh issue of equity, combined with offer for sale, the IPO will result in dilution of equity and EPS, apart from transfer of ownership internally.

Key dates for Nexus Select Trust REIT IPO and how to apply?

The issue opens for subscription on 09th May 2023 and closes for subscription on 11th May 2023 (both days inclusive). The basis of allotment will be finalized on 16th May 2023 and the refunds will be initiated on 17th May 2023. In addition, the demat credits are expected to happen on 18th May 2023 and the stock will list on 19th May 2023 on the NSE and the BSE. Nexus Select Trust will be the first mainboard REIT IPO of FY24 and would be crucial in setting the tone for FY24. It is hoped that for the IPO market, the FY24 is able to recreate the IPO magic of FY22. Let us now turn to the more practical issue of how to apply for the IPO of Nexus Select Trust REIT.

Investors can apply either through their existing trading account or the ASBA application can be directly logged through the internet banking account. This can only be done through the authorized list of self-certified syndicate banks (SCSB). In an ASBA application, the requisite amount is only blocked at the time of application and the necessary amount is debited only on allotment. Investors can apply in the retail quote (up to Rs2 lakh per application) or in the HNI / NII quota (above Rs2 lakh). Minimum lot sizes will be known after pricing.

Financial highlights of Nexus Select Trust REIT

The table below captures the key financials of Nexus Select Trust REIT for the last 3 completed financial years.

Data Source: Company RHP filed with SEBI

There are few key takeaways from the financials of Nexus Select Trust REIT which can be enumerated as under. Investors must look at this as an indirect opportunity to invest in the commercial real estate sector and for regular income. Normally, income on commercial properties is regular and predictable and most of the inflows have to be passed on as dividends to these unit holders. Blackstone has a quality portfolio so the investors get that added benefit. At a time when equity markets are volatile, this could be a good way to diversify the asset mix for investors. It must be looked at more from a portfolio allocation angle rather than a return angle.