Monthly archive: May, 2008
Increase in shares outstanding - sign of an IPO?
Salvador asks:
We own stock in a private company that we believe will go public in the next few years. We recently received a letter (pursuant to 603(b) or something) informing us of an increase in the number of outstanding shares in the company. There was no mention of a split or dividend. Can this be a sign of an impending IPO?
We own stock in a private company that we believe will go public in the next few years. We recently received a letter (pursuant to 603(b) or something) informing us of an increase in the number of outstanding shares in the company. There was no mention of a split or dividend. Can this be a sign of an impending IPO?
Foreign Investors Line Up With Big Money as Govt Clears Air Over Fiis in Realty
Camila asks:
Foreign investors are once again queuing up to pour money into India’s red hot property market, with the government relaxing some of the norms. At least half-a-dozen deals worth $1billion are being finalised by Citigroup, Deutsche Bank, The Carlyle Group and Blackstone, among others, with unlisted real estate companies, as pre-initial public offering (IPO) placement.
A clarification issued by the department of industrial policy & promotion (DIPP), under the ministry of commerce and industry, has cleared the air for investments by foreign institutional investors (FIIs), foreign venture capital funds (VCFs) and private equity players.
FII investments in companies pre-IPO will be treated as foreign direct investment (FDI), as per the clarification, and the investment will have to be channelled for FDI-compliant greenfield projects only.
This has settled the differences arising from views aired by the finance and commerce ministries, and financial sector regulators. Now foreign investors will have to wait three years before exiting the company completely. DIPP has clarified that the investor will have to lock in a minimum of $5 million, in case of a joint venture with an Indian real estate player, or $10 million, in case of a wholly-owned subsidiary of a foreign investor.
The existing rules for foreign investors regarding the lock-in period is applicable for real estate sector as well. Hence, investments by FIIs, foreign VCFs and PE investors will have a minimum lock-in period of one year, if the investment occurred during the preceding 12 months before the IPO date.
This has paved way for a large number of foreign investments at the entity level. This is a complete departure from the past, when equity investments used to be all project-specific. Industry officials said leading property players are sewing up equity deals at the entity level, with greater clarity in foreign investments in the sector.
A majority of real estate companies planning an IPO are currently in talks with foreign investors. The leading players planning an IPO are Hiranandanis, Lodha Developers, Runwal group, Kolte Patil Developers and Paranjpe Schemes (Construction). “There used to be some kind of confusion in the market as far as FIIs’ pre-IPO investments in real estate companies are concerned.
With the clarification issued by the government, foreign VCFs and PE funds can now invest in the real estate firms with a lock-in period of minimum one year. It will definitely boost investments in the sector,” said Akhil Hirani, managing partner of Majmudar & Co.
According to investment bankers, the change in rules would pre-empt any further speculation in the real estate market, and that FIIs would not be allowed to cash in immediately in the IPO.
Earlier, DIPP and the stock market regulator Sebi were not in favour of a lock-in period and had instead suggested pre-IPO placements by FIIs be considered as portfolio investments. However, the recommendation was not accepted by the finance ministry, which, in turn, asked Sebi to put in place the lock-in on FII investments in real estate.
Leading real estate players, eager to cash in on investors’ appetite for realty stocks, were seeking FDI status for their pre-offer placement since many of their existing projects were not meeting the tough FDI norms. For instance, a project needs to be at least 25 acres to be notified FDI-compliant.
For more information on Real Estate Agents, MLS visit Propertiesmls.com
Source: IndiaRealEstateblog
Foreign investors are once again queuing up to pour money into India’s red hot property market, with the government relaxing some of the norms. At least half-a-dozen deals worth $1billion are being finalised by Citigroup, Deutsche Bank, The Carlyle Group and Blackstone, among others, with unlisted real estate companies, as pre-initial public offering (IPO) placement.
A clarification issued by the department of industrial policy & promotion (DIPP), under the ministry of commerce and industry, has cleared the air for investments by foreign institutional investors (FIIs), foreign venture capital funds (VCFs) and private equity players.
FII investments in companies pre-IPO will be treated as foreign direct investment (FDI), as per the clarification, and the investment will have to be channelled for FDI-compliant greenfield projects only.
This has settled the differences arising from views aired by the finance and commerce ministries, and financial sector regulators. Now foreign investors will have to wait three years before exiting the company completely. DIPP has clarified that the investor will have to lock in a minimum of $5 million, in case of a joint venture with an Indian real estate player, or $10 million, in case of a wholly-owned subsidiary of a foreign investor.
The existing rules for foreign investors regarding the lock-in period is applicable for real estate sector as well. Hence, investments by FIIs, foreign VCFs and PE investors will have a minimum lock-in period of one year, if the investment occurred during the preceding 12 months before the IPO date.
This has paved way for a large number of foreign investments at the entity level. This is a complete departure from the past, when equity investments used to be all project-specific. Industry officials said leading property players are sewing up equity deals at the entity level, with greater clarity in foreign investments in the sector.
A majority of real estate companies planning an IPO are currently in talks with foreign investors. The leading players planning an IPO are Hiranandanis, Lodha Developers, Runwal group, Kolte Patil Developers and Paranjpe Schemes (Construction). “There used to be some kind of confusion in the market as far as FIIs’ pre-IPO investments in real estate companies are concerned.
With the clarification issued by the government, foreign VCFs and PE funds can now invest in the real estate firms with a lock-in period of minimum one year. It will definitely boost investments in the sector,” said Akhil Hirani, managing partner of Majmudar & Co.
According to investment bankers, the change in rules would pre-empt any further speculation in the real estate market, and that FIIs would not be allowed to cash in immediately in the IPO.
Earlier, DIPP and the stock market regulator Sebi were not in favour of a lock-in period and had instead suggested pre-IPO placements by FIIs be considered as portfolio investments. However, the recommendation was not accepted by the finance ministry, which, in turn, asked Sebi to put in place the lock-in on FII investments in real estate.
Leading real estate players, eager to cash in on investors’ appetite for realty stocks, were seeking FDI status for their pre-offer placement since many of their existing projects were not meeting the tough FDI norms. For instance, a project needs to be at least 25 acres to be notified FDI-compliant.
For more information on Real Estate Agents, MLS visit Propertiesmls.com
Source: IndiaRealEstateblog
Publicly Listing a Company, the Advantages & Disadvantages
Emile asks:
A company’s reasons for deciding to publicly list on the stock exchange often include the ability to get access to the capital markets for financial expansion and acquisitions. They usually have invested many years of plowing back profits and guaranteeing borrowings and rather than sell out, they wish to remain with the company and be part of its future growth.
Even if your business is suited to floatation, it may not be the right choice for you. There are a number of key advantages and disadvantages to weigh up:-
Advantages
• You get access to new capital to develop the business
• A float makes it easier for you and other investors to realize your investment
• You can offer employees extra incentives by granting share options
• Being a public company can provide customers and suppliers with added reassurance
• Your company may gain a higher public profile, which can be good for business
• Having your own traded shares gives you greater potential for acquiring other businesses, because you can offer shares as well as cash
• Personal guarantees of directors are not usually required for borrowings
Disadvantages
• Your business may become vulnerable to market fluctuations, which are outside your control.
• If market conditions change during the floatation process you may have to abandon the float.
• The costs of floatation can be substantial and there are also ongoing costs such as higher professional fees.
• You will have to consider shareholders interests when running the company – which may differ from your own objectives.
• You may have to give up some management control of the business and ultimately there’s a risk that the company could be taken over.
• Public companies have to comply with a wide range of additional regulatory requirements and meet accepted standards of corporate governance
• Managers could be distracted from running the business by the demands of the floatation process, and by dealing with investors afterwards
It generally takes 6 months to publicly list a company on the stock exchange although the time period can range from 3 months to 2 years. You will need a range of professional advisors to assist with the legal, financial, accounting and valuation aspects of publicly listing plus prospectus preparation, underwriting of shares and assistance with IPO Plans.
To learn more about the advantages and disadvantages of a public listing, contact your stockbroker or establish a relationship with an investment banking or corporate advisory firm who specializes in these opportunities. There is also a lot of free information on the ASX website. Go to www.asx.com.au
© Len McDowall, Integral Capital Group 21st September, 2007
www.integralcapital.com.au
A company’s reasons for deciding to publicly list on the stock exchange often include the ability to get access to the capital markets for financial expansion and acquisitions. They usually have invested many years of plowing back profits and guaranteeing borrowings and rather than sell out, they wish to remain with the company and be part of its future growth.
Even if your business is suited to floatation, it may not be the right choice for you. There are a number of key advantages and disadvantages to weigh up:-
Advantages
• You get access to new capital to develop the business
• A float makes it easier for you and other investors to realize your investment
• You can offer employees extra incentives by granting share options
• Being a public company can provide customers and suppliers with added reassurance
• Your company may gain a higher public profile, which can be good for business
• Having your own traded shares gives you greater potential for acquiring other businesses, because you can offer shares as well as cash
• Personal guarantees of directors are not usually required for borrowings
Disadvantages
• Your business may become vulnerable to market fluctuations, which are outside your control.
• If market conditions change during the floatation process you may have to abandon the float.
• The costs of floatation can be substantial and there are also ongoing costs such as higher professional fees.
• You will have to consider shareholders interests when running the company – which may differ from your own objectives.
• You may have to give up some management control of the business and ultimately there’s a risk that the company could be taken over.
• Public companies have to comply with a wide range of additional regulatory requirements and meet accepted standards of corporate governance
• Managers could be distracted from running the business by the demands of the floatation process, and by dealing with investors afterwards
It generally takes 6 months to publicly list a company on the stock exchange although the time period can range from 3 months to 2 years. You will need a range of professional advisors to assist with the legal, financial, accounting and valuation aspects of publicly listing plus prospectus preparation, underwriting of shares and assistance with IPO Plans.
To learn more about the advantages and disadvantages of a public listing, contact your stockbroker or establish a relationship with an investment banking or corporate advisory firm who specializes in these opportunities. There is also a lot of free information on the ASX website. Go to www.asx.com.au
© Len McDowall, Integral Capital Group 21st September, 2007
www.integralcapital.com.au
