Upcoming IPO 2021: In this Brookfield India REIT IPO, we have tell you about the Brookfield REIT's IPO launch date, News, Price, Price Band, Lot Size, the Business model and its Financials in detail.
Brookfield India REIT IPO Review, Details, Share Price, Launch Date, News | Upcoming IPO 2021
Hey friends! Brookfield REIT IPO is going to go live soon. All of you would want to know about it. I am not saying that all of you are interested in this IPO. But you would surely want to know- How does it work? What is its business model? How does it earn? If you invest in its IPO i.e. you get its units (not shares- I will share this reason moving ahead) then I will talk about how it will give you a return in the future.
As you know that if you buy any company's share or invest in its IPO then the share's value surges when its business performs well. In the case of REIT, we will talk about the important factors that will take it forward and give returns to the investors (As in the case of share, it is the company's business) REIT- Real Estate investment trust- What are these? How do they work?
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Firstly let me tell you that their business model is normally like mutual funds. Its structure is not like normal shares. (Like there are promoters of a company)In this case, sponsors own such companies. Investors invest their money over here and that amount is pooled in one place. The trust invests such money forward. So that you get the benefit of it as a unitholder. Let's see how it works.
The trust invests money in real estate for different purposes. They normally invest in building commercial properties and parks. Rental income is derived from these sources. These companies also give loans for the construction of real estate properties. The income derived from such sources is passed onto the investors. From here you would have understood that in this case sponsors pool the entire money and invest it further. (like there are fund managers in the case of mutual funds)
Then the fraction of units is delivered to you of that REIT. (of the amount invested by you as an investor) This is the business model of REIT. The next part (after you have understood the business model) that we will discuss in detail is regarding the factors that contribute to the earnings of investors. There are normally three things that generate profit for REITs. Profit earned by REITs benefits you further.
The first is rental income. Assume that a REIT has built a commercial property and has given it further for rent. Any rent that will be received from this source will benefit the company as it is an income. REIT benefits from this from the income perspective.
Now let's talk about the income that can be passed as dividends by REITs to their shareholders. Assume that REIT earned Rs.100 rental income from a commercial property. The company will also incur operating expenses say- Rs.90. Rs.100 minus Rs.90 equals Rs.10. Rs.10 is the company's operating profit. The company has to pass 90% of this income(i.e.Rs.10) to the unitholders as dividends.
In this case, Rs.100 is the company's revenue in form of rental. Rs.90 is the company's expense. Rs.10 is the company's operating profit. 90% of this- Rs.9 is distributed to different unitholders in their respective fractions. This is the first and an important revenue source when investing in a REIT. The second source of income is Interest. Interest is earned through lending money to somebody. Let's see how these trusts lend money.
REITs generally do not invest directly in properties. They build their SPVs. Its full form is Special Purpose Vehicles. They own different properties and lend money to SPVs to build properties. This trust provides them with the money. In return, they charge interest from them.
This interest is an income for the trust. If it's the trust's income then it will also be passed to you; because you have bought some units of the trust. These are three important things that derive its income.
You know that its units will trade on the stock market. Anything that trades on the share market will give you a benefit when the price surges. How do the prices increase? Normally a company's share price rises due to the expectations of its business. If investors feel that a business has great prospects then they will invest over here. As the demand increases and supply is limited, share price rises automatically in the market.
These are three different ways of REIT's income that may benefit you (as you invest over here). I told you about different ways. I am not saying that you will surely benefit. These are different ways/factors that derive its valuation (as in the case of a company these factors are high operating profit margin, low debt, high revenue, great growth, etc)
Now let's talk about the industry. The office demand (of A1 grade offices for MNCs) has seen 5% compounding growth in the last 5 years.
The second remarkable demand growth has been in the office space requirements in Bombay, Bangalore, and NCR. Demand has been remarkable. Besides this the rental income has also seen growth in recent times. (excluding covid time)
Now let's talk about Covid's impact. The first half of FY21 (i.e. till September) saw a 26% drop in revenue as compared with the same period last year. This industry was severely impacted by Covid (if you view different metrics)
Secondly, let's talk about rentals and valuations of this industry. These figures are quite attractive. Here we have compared per sq. feet rentals of India with other countries. In comparison, you will get to know that India has a low rental as compared to other companies.
In the coming time, a demand boost will benefit this industry. Along with rentals, the valuations are also attractive. the Indian rental compared with other countries of the world is depicted. (in US dollars per sq feet per month)
In London, this price is US$ 11.4 per sq feet. Mumbai has the highest price at US$ 1.8 per sq feet. The price in Bangalore and NCR is around US$ 1.2 per sq feet each. Now you would want to know the most important demand driver of the office space sector. Here you will get to see maximum absorptions of REITs that work in the commercial real estate sector.
Technology is an important demand driver that consumes 37.6% absorption. Besides this, the banking sector and professional services consume 11.7% and 8.8% respectively. You can see other information also.
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company's revenue and profit
Now let's talk about the financials of the company in recent times. Firstly I will talk about the company's revenue and profit. Assets are important for this company as it operates in the real estate sector. As you can see on my screen the assets, revenue, and PAT from 31 March 2018 to 30 September 2020 are depicted.
Here you will get an idea of the company's performance in recent times. Firstly let's talk about revenue. The company's revenue of Rs.866 cr in 2018 rose to Rs.929 cr in 2019. It further rose to Rs.981 cr in 2020. Here you will get to see one aspect in the revenue of the company- Not much growth has been in the revenue of the company.
While the company's profit was Rs.161 cr in 2018. In 2019 the company turned to a loss-making company and booked a loss of Rs.15 cr. In 2020 the company booked a profit of Rs.15 cr. Till 30 September 2020, the company has booked a revenue and profit of Rs.467 cr and negative Rs.73 cr respectively.
The company is still at a loss. Let's talk about the assets of the company. The assets of the company have not witnessed great growth in recent years. Its assets increased from Rs.4,893 cr in 2018 to Rs.5,136 cr in 2020. The company's net profit margin is negative 15%. The company has Rs.6,600 cr as debt. These are important things to know for taking an investment-related decision.
Its competitors in the industry include 2 companies- Embassy and Mindspace. REITs of these companies also trade on the share market. You can check them as well for your research. Now let's talk about investment pros and cons. Firstly we will talk about investment pros. The first pro is that there are chances of industry dynamics being favorable in the near future. As the per capita space consumption is quite low right now. In recent times decent growth has been seen over here.
The second important pro for investment is its brand. You might have heard about its sponsor- Brookfield. This is a huge global company. (alternate assets) Its assets under management are in huge quantities. A global brand is associated with REIT that makes this company interesting. This company's properties are strategically located in Mumbai, Noida, New Delhi, and Kolkata. The maximum properties built by it in Kolkata in recent times are equipped with new amenities. The rental issue cannot be seen over here as remarkable amenities lead to more chances of rental income.
Let's talk about the cons. The company has a high debt level. The interest coverage ratio of the company is still less than 1. You must think about this before investing. The company has booked losses in recent times. But it booked profit in one year. The major reason behind this was the company's other income that doesn't emerge from its core business. The profit of the company derives its valuations in the future. Hence you should see in detail- The reasons behind the loss booked by the company and the strategies of the company in the future. (of turning itself from a loss-making company to profit-making)
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IPO details
Now let's talk about the IPO details. These details are important for you to know if you want to bid over here. The company's total IPO is Rs.3,800 cr. The entire IPO is a fresh issue. The company is bringing new units that will be given to the shareholders if they invest over here. The IPO price is kept between Rs.274-275.
You will have to bid(1 lot) for a minimum of 200 shares. You had to normally bid Rs.14,000 for an IPO. Over here you will have to bid with around Rs.55,000. IPO will open between 3-5 February. You can bid for it during this time. Its tentative listing date is 17 February. In the coming time, you will get to know if it changes or not.
So this was our today's review on Brookfield REIT IPO. I hope that you liked today's article.
We tried to explain the entire business in simple terms so that there are no doubts/complications in your mind. You can use this information and can further do detailed research to decide whether to invest or not in this IPO. After doing the entire research take appropriate decisions and invest for the long term. You can make good returns if you invest in the long term (avoiding speculations) I hope that you will do great research and then do a good investment.
Comment below: Should we apply for its IPO or not?
Happy investing!
We bring all article for educational purposes. We don't give any buy/sell recommendations of any stock. Before investing in any stock, do your own research and then invest in the long term.
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