Shabana Hussain, June 18, 2007
Mint

Omaxe Ltd, the Delhi-based property developer that plans to kick off the road show for its initial public offering in a week, may have to price its shares lower than rival DLF Ltd’s share price for it to attract investors, say analysts.

While Omaxe has not yet decided on the price band for the issue, a senior company official familiar with the offer, speaking on the condition he wouldn’t be named, said the price band would be below Rs500 a share, the lower end of the DLF band.

Omaxe is currently consulting with its merchant bankers to arrive at a price band. Mint could not independently verify the Rs500-a-share number.

Omaxe’s offer of 17.8 million shares pales in comparison with DLF’s 175 million shares, which is the largest share sale to hit the Indian market. The DLF offer got Rs9, 187 crore from the market at a price of Rs525 per share. At Rs500, Omaxe could generate Rs890 crore.

Still, retail investors did not fully subscribe to their quota of DLF shares, indicating they are turning cautious about the real estate sector. Besides, with DLF having garnered such a large amount of money from investors, there may be less cash available now, some analysts say.

“Pricing will play an important role. If the company wants more investors to subscribe to the issue, it should price its shares at a lower price band,” said Suruchi Kapoor, an analyst with SAL Securities Pvt. Ltd.

“If DLF’s shares list at a decent premium to the issue price of Rs525 announced by the company, the response to Omaxe’s IPO could be good,” said Nitin Khandkar, senior vice-president (research), Keynote Capitals Ltd. “After DLF’s listing, the real estate sector will invite interest from investors. But the performance of the IPO will largely depend on the valuation of the company and the pricing strategy.”
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