Sobha Developers to raise Rs 3,000-mn thru rights issue

Bangalore: Sobha Developers has decided to raise Rs 300 crore through rights issue to meet its long-term capital needs. The company informed the BSE that it has decided to issue shares on rights basis to its existing shareholders.

Sobha will be deciding the price of the rights issue at its next board meeting by August end. Mr J.C. Sharma, Managing Director of Sobha Developers, said with its plans of envisaging expansion, its operation from present one location to three more locations in the country, the company has decided to adopt this route. The company has reserves of Rs 915.5 crore.

With the debt-equity ratio at 1.7:1, the company was looking at reducing it.

Besides, the overall economic environment impacting the real estate industry, it would be difficult to service high debt burden by going in for borrowing.

He, however, described as hypothetical, if the rights issue could go through without any setback, due to the stock market volatility and said, “why should you assume that it would face difficulty in getting subscribed.”

He also termed as presumptuous that promoters’ could use this opportunity to increase their stake, in the event of poor response to the issue.

Currently, promoters are holding about 87 per cent in the company, while foreign institutional investors holding are holding close to 6 per cent.

According to Angel Broking’s analyst tracking the real estate, Mr Shailesh Kanani, the company’s debt-equity ratio was quite high. The company was planning to raise some finance last year to meet project execution.

However, Mr Shailesh Kanani felt that in the prevailing market conditions, both the stock market and the real estate, the issue could encounter some difficulty.

He said unless the price of the issue was known, it could not be easy to arrive at any conclusion of the outcome.

He was in agreement with the company’s poser that the debt-equity ratio had to be brought down.

The Sobha Developers shares closed at Rs 264.45 gaining 3.71 per cent over the previous day’s close. About 37.7-lakh shares changed hands, of which, 21.78 per cent was up for delivery.