Indiabulls Real Estate Ltd. said Wednesday it has raised around 26.56 billion rupees ($557 million) via a share sale to institutions, joining a growing list of Indian realty companies that are raising funds to reduce debt and boost liquidity.

Indiabulls, one of the country's biggest property developers, issued about 143.59 million shares to institutions at 185 rupees each, the company said in a filing to the Bombay Stock Exchange.
Indiabulls, part of the diversified Indiabulls Group, didn't identify the investors and company executives didn't immediately respond to queries.

A person familiar with the matter said Tuesday the shares were sold to 49 institutional investors from India and overseas. Morgan Stanley was the sole bookrunner for the deal, the person said.
Higher borrowing costs and fears of job losses in a slowing economy have hit property sales in India, affecting cash flows of the realty companies. This has led several developers to raise capital via share issues, asset sales and also replacing their costlier debt with cheaper loans.
The companies are also introducing mid-priced residential projects and offering customized loan packages to lure customers.

"Most real estate companies across the region (India) had improvements in access to capital from January/February this year," Unmesh Sharma and Gautam Duggad, Mumbai-based analysts at Macquarie Research, said in a recent note. "Only now do Indian property developers appear to be experiencing better capital conditions."

Macquarie rates India's property sector overweight, citing improving liquidity for the property developers.
Founders of DLF Ltd., the country's biggest property developer by market value, raised 38.60 billion rupees on May 13 by selling a 9.9% stake to investors that included HSBC Holdings Inc. and Fidelity.

Unitech Ltd., the second-ranked realty company by market value, is also gearing up to raise additional long-term funds via a warrant issue to its founders as well as an issue of securities.
The company had raised 16.21 billion rupees in April by selling shares to institutional investors including HSBC Holdings PLC, Prudential PLC and Singapore's Orient Global.

Unitech plans to repay up to 17 billion rupeesc of debt in the current financial year that began April 1 through cash flows from sale of apartments and shopping malls, a senior company executive, who asked not to be named, said last week. Its debt is currently at about 80 billion rupees.

Shares of Indiabulls traded 5.1% higher at 210 rupees as of 0724 GMT on the Bombay Stock Exchange, compared with the benchmark index which was down 1.4%.
Shares of Indiabulls have gained 52% since January, outperforming a 46% rise in the BSE's realty index.

March 18: The Indian markets shed a part of their gains during the final hour of trade on the back of profit booking. However, they ended the day well above yesterday’s closing level. The BSE-Sensex closed with gains of around 110 points, while the NSE-Nifty closed higher by 40 points. Stocks from the mid-cap and small-cap indices ended the day in the green as well. Buying activity was witnessed in stocks across sectors, with realty and metal leading the pack of gainers. However, the BSE-FMCG Index ended the day in the red.

Most other Asian markets closed on a firm note. The European indices are currently trading mixed. Rupee was trading at 51.34 against the US dollar at the time of writing. Real estate stocks ended the day on a firm note led by Akruti City, Mahindra Lifespace, DLF and HDIL. Stocks from the real estate sector have been amongst the worst performers in the past one year. This is mainly on account of lower demand and liquidity issues. In fact, until last week, the BSE Realty Index had fallen by nearly 46% since the beginning of 2009. However, the index has been amongst the top gainers in the past few trading sessions. The reason behind the same is price cuts in the range of nearly 30% to 40% announced by real estate players. While this move may impact their margins significantly, it will benefit the companies by reducing their inventory, bringing about much needed liquidity. It may be noted that a handful of realty players are sitting on a stock pile of projects that were launched a year back.

Auto stocks ended the day on a firm note led by Bajaj Auto and Ashok Leyland. As per a leading business daily, M&M has recently inaugurated its defence auto facility at Faridabad. This facility has the capability to produce nearly 200 specialised vehicles, which will be used by the armed forces, paramilitary and the police. However, it plans to increase the capacity to 350 units in the next fiscal. This facility will also produce bullet-proof versions of its multi-utility vehicles such as Scorpio and Bolero. With sales of the mainstream auto market drying up, companies such as M&M, which have a certain amount of exposure in the defense area, have been focusing on increasing defence supplies.

As per a report issued by McKinsey & Company, India is likely to face a shortfall of nearly US$ 150 bn to US$ 190 bn in funding its infrastructure projects in the current five-year plan period (FY07 to FY12). The reason behind this view is the global economic slowdown and rising interest rates, which have made project financing expensive and financial closure more difficult. It may be noted that the Planning Commission had earlier envisaged infrastructure investments to the tune of US$ 500 bn. Of this, nearly one-fourth was to be spent by the private sector and the balance by the public sector.
Credit: Seekingalpha