IPO Note - Brookfield India Real Estate Trust Ltd By Choice Broking
Salient features of the IPO:
* Brookfield India Real Estate Trust (Brookfield REIT), backed by Canadian asset manager - Brookfield Asset Management Inc., is planning to raise Rs. 38,000mn through an REIT IPO, which will open on 3rd Feb. and close on 5th Feb. 2021. The price band is Rs. 274 - 275 per unit.
* The issue consists of fresh issue. Of the net proceeds from the fresh issue, Rs. 35,750mn will be utilized for the repayment/prepayment of existing debt availed by its asset SPVs.
* On 27th Jan. 2021, Brookfield REIT and its asset SPVs are assigned a corporate credit rating of “Provisional CCR AAA/Stable” by Crisil Ltd.
Key competitive strengths:
* Global sponsorship with local expertise
* Difficult to replicate, dominant and strategically located properties
* Placemaking capabilities
* Diversified blue chip tenant roster and cash flow stability
* Significant identified internal and external growth opportunities
* Experienced, cycle-tested senior management team
* Institutional corporate governance framework and strong alignment of interests
Risk and concerns:
* Weakness or unfavorable global economic outlook
* Uncertainties on the duration and long-term impact of the Covid-19 pandemic
* Higher adoption of work-from-home operating model by the tenants post Covid-19
* Inability to maintain the desired occupancy levels
* Unfavorable rental rates
* Delay in the execution of under construction areas
* Unfavorable interest/finance costs
* Unfavorable change in government policies & regulations
Peer comparison and valuation: At the higher price band of Rs. 275 per share, Brookfield REIT’s unit is valued at 88.4% of its net asset value (NAV), as compared to peer average of 96.9%.
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