Brookfield India REIT IPO: Issue subscribed over 7.5 times; institutional investors portion booked 5 times

The Rs 3,800-crore Brookfield India Real Estate Trust (REIT) initial public offer (IPO) has been subscribed 7.52 times so far on the final day of the bidding process. Brookfield is the third REIT IPO after Embassy Office Parks REIT in 2019 and Mindspace Business Parks REIT in 2020. So far, the issue has received bids for 57.31 crore units against the offer size of over 7.62 crore units, according to the data available on the exchanges. The portion set aside for institutional investors saw a subscription of 4.79 times, and that of other investors 10.79 times.

Yash Gupta, Equity Research Associate, Angel Broking Ltd, gave a ‘neutral’ rating to the issue on the back of the uncertainties, weak financials and high debt on book. “We expect listing gains to be very limited up to 10%-15%. Long term investors who want to add REIT in their portfolio can apply for the IPO,” he said. Mindspace Business Parks REIT was listed in August 2020 amid COVID-19 pandemic and raised Rs 4,500 crore.

Anish Moonka of JST Investments told The Outlooker Online, that the 7.95 per cent yield of the REIT is attractive (Rental yields of Brookfield are the highest among the other alternatives) and compasses a portfolio of 14.0 msf (comprising 10.3 msf of Completed Area, 0.1 msf of under Construction Area, and 3.7 msf of Future Development Potential), with additional rights to acquire a further 8.3 msf and rights of the first offer on an additional 6.7 msf, both currently owned by members of the Brookfield Group. “Given a unit is available at a 12 per cent discount to NAV/unit when other listed REITs are much more expensive while providing much less value on the dividend and optionality side, Brookfield REIT looks attractive,” Moonka said.

Analysts at Choice Broking Ltd said that the technology companies account for around 50% of the leased area of the existing portfolio. “Considering their positive outlook (technology sector), we don’t think there will be any concerns on future tenancy,” the analysts said. Based on the projected distribution schedule, pre-tax yield would remain in the range of 8-8.5% in FY23E. With interest rate at lower levels in the economy, the projected yield from this REIT seems to be attractive. The brokerage firm has given a ‘Subscribe’ rating for the long term to the issue.

(The recommendations in this story are by the respective research and brokerage firms. The Outlooker Online does not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)