Mumbai-based real estate developer, Arkade Group, is planning an initial public offering (IPO) to raise about ₹600 crore in a fresh issue of shares, Chairman and Managing Director Amit Jain said.

The IPO, with a 20-per cent dilution of promoter equity, will value the company at around ₹3,000 crore. The total funds to be raised will also include a pre-IPO placement to some strategic investors, Jain told businessline.

The company, which is focused on residential realty, recently invested ₹300 crore for four new projects to be launched shortly. With a total development area of 14.8 lakh sq ft, these projects have the potential to generate revenue of ₹1,525 crore. It is currently executing projects of 12 lakh sq ft, from which it expects to generate revenue of ₹1,200 crore.

Jain said that the IPO, expected to be launched around March 2024, will be funding its next growth phase, which will be gradual and through the organic route. Its houses are priced across the spectrum from affordable to premium, depending on the locality.

Seasoned realtor

The company has been in existence over three decades and has delivered 25 projects and 4,000 units with an area of over 40 lakh sq ft.

The company has ongoing projects in Mumbai’s suburbs of Santacruz, Andheri, Malad and Borivali. The upcoming projects will be in Santacruz, Vile Parle and Mulund. The company is expecting to end with sales worth ₹500 crore during the currest fiscal and double that in the next fiscal.

Arkade Group has also received letters of intent from two housing societies for development projects, both in Mumbai’s western suburbs of Malad and Goregaon. Jain said that redevelopment would be one of the company’s focus areas, with an expected internal rate of return of 20 per cent anualised.

However, he plans to keep away from slum redevelopment projects as they tend to take a longer time and are often prone to run into delays.

Equity markets attractive

In recent months, a number of real estate companies have been turning to the equity capital markets to raise funds. Prominent among these are Mumbai-based Rustomjee and Delhi-based Signature Global. While Rustomjee listed at a modest premium on the bourses and is currently trading below its issue price, Signature Global is yet to hit the market, having received regulatory approval for its ₹1,000-crore issue.

The sudden upswing in residential demand post the Covid-19 pandemic has encouraged real estate developers to pour more money into projects. Real estate developers have traditionally depended on debt funding and construction finance, which are costlier.  Now they are finding it a better option to tap the equity markets, either through the issue of shares, or through private placement of equity.

In Mumbai especially, the large number of housing societies that are coming up for redevelopment has opened up opportunities for deep-pocketed players with a good track record of timely deliveries.