IndiaBulls – BT
Indiabulls plans $200m rights issue at 16 cents a unit
Business trust also seeks to expand portfolio beyond office space
INDIABULLS Properties Investment Trust (IPIT) has proposed to issue some 1.25 billion new units at 16 cents each to raise $200.1 million.
The business trust also intends to look beyond office space to invest in retail, residential or hospitality assets.
IPIT is conducting the 53-for-100 renounceable and underwritten rights issue to reduce debt as the Mumbai office space market weakens – occupancies and rents have both declined, it said yesterday.
The trust had borrowings of $258.3 million as at June 30, against cash and cash equivalents of $6.7 million. The ratio of borrowings to total assets was 10.4 per cent.
Lower debt obligations would put it in a ‘better position to make commercial decisions’ and in a ‘stronger negotiating position with potential tenants’, it said.
The rights issue price of 16 cents is at a 48.4 per cent discount to IPIT’s closing price of 31 cents on Wednesday. The trust asked to halt trading in its units yesterday because of the cash call.
Of the $200.1 million to be raised, around $193 million, or 96.5 per cent, will go towards debt repayment. The remaining $7.1 million will pay for expenses incurred for the rights issue, and for corporate and working capital purposes.
Morgan Stanley Asia (Singapore) is the sole lead manager and underwriter of the deal.
Grapene Limited, which as at Sept 4 holds a stake of around 34 per cent in IPIT, made an irrevocable undertaking to take up its pro rata entitlement of 425.1 million rights units.
Grapene also inked a standby commitment agreement with Morgan Stanley Asia (Singapore) to subscribe for up to 700.4 million rights units in total, or 90 per cent of the rights units. The rights issue is subject to a whitewash resolution.
IPIT also proposed to adjust its principal objectives. ‘Having the flexibility to change the development mix of IPIT’s portfolio . . . would be prudent especially in light of the current slowdown in rentals as well as the softening of market demand for office space,’ it said.
From its initial focus of investing primarily in income-producing office space in India, IPIT could start looking at retail, residential or hospitality properties. It said it will keep more than 50 per cent of total lettable area in its portfolio in income-producing office space. IPIT could also start selling residential properties upon their completion.
IPIT will hold an extraordinary general meeting on Sept 29 to seek unitholders’ approval for the rights issue, whitewash resolution and expansion in objectives.
Business trusts and Reits allow unit-holders to receive dividend payments from operating cash flow instead of accounting profit. While Reits are required to pay 90 per cent of distributable income to unit-holders, there is no such requirement for business trusts.