Mindspace Business Parks REIT IPO Opens On July 27: Should You Invest?

Issue details:

In the REIT space, it is the second company after Embassy to list on the bourses. The Rs. 4500 crore IPO issue will open for subscription from July 27 and close on July 29. The issue consists of a fresh issue of units aggregating up to Rs 1,000 crore and offer for sale of units of Rs 3,500 crore. The bidding for public issue by anchor investors will open on July 24.

Issue price band has been fixed at Rs. Rs 274-275 per share.

Now as against the earlier norm, for REIT IPO subscription, SEBI has changed rules to a minimum investment limit in 200 units for attracting more retail participation. When the earlier Embassy REIT came up, investors needed to invest in minimum 800 units.

And now for this limit of 200 units, investors need to at a minimum invest an amount of Rs. 55000.

Company details:

Mindspace REIT owns a high-quality commercial space portfolio in the country that rents out space to MNCs. And as India's demographics and other factors have been favorable there has been a huge demand from both domestic giants as well as MNCs for office space.

Also, the Mindspace REIT has been assigned a corporate credit rating of 'Provisional CCR AAA/Stable' by CRISIL.

Brokerage view:

IIFL Securities

The ongoing COVID-19 poses challenge to the near-term projections but the brokerage firm believes that over time M-REIT would offer a steady double-digit total return structure, on a steady and growing dividend income stream. It recommends subscribing to the issue.

HDFC Securities

As per the brokerage, portfolio assets of the company are well diversified with 172 tenants and no single tenant contributing more than 7.7 percent of the Gross Contracted Rentals. It added that approximately 84.9 percent of the Gross Contracted Rentals were derived from leading multinational corporations and approximately 39.4 percent from Fortune 500 companies.

The tenant base includes multinational and Indian corporates, including affiliates of Accenture, Qualcomm, BA Continuum, JP Morgan, Amazon, Capgemini, Facebook, Barclays. It has a high-quality tenant base with 92 percent Committed Occupancy along with long-term contracted rentals which provide long-term visibility of its revenue, noted the brokerage. It is well positioned to achieve further organic growth through a combination of contractual rent escalations, re-leasing at market rents, lease-up of vacant space and new construction to accommodate tenant expansion, it further added.

Issue Objective:

Through the anchor investors, the company has so far raked Rs. 2463 crore and through the proceeds from the issue looks at bringing down its debt which at the end of FY20 stood at Rs. 7382 crore. Also, the REIT looks at repayment of debt on certain assets by KRC Group.

Conclusion

Though from a short term perspective, there is uncertainty on lease rentals given the Covid 19 situation, it is to be noted that investors with a medium to long term perspective can consider the issue for both capital appreciation and steady income by way of dividend income.

Interestingly, REIT is given NDCF or net distributable cash flow which is distributed among its unit holders as dividend. And this for the second half of FY 21 stands at Rs. 574 crore.

Also, the first Embassy REIT IPO also has been an outlier with gains of 22% since its listing in April last year.

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