thumbsdownINDIABULLS PROPERTY INVESTMENT TRUST (IPIT) will probably go down on record as one of the worst (if not the worst) property related business trust in Singapore.

IPIT invests in premier commercial space in India. Shareholders who invested from their IPO in 2008 and held on all the way would have lost almost all their money.

This counter is going to be gone soon so here’s a quick recap of some of the highlights of their short operating history:


Listed in 2008 at an IPO price of $1

About 262 million units were offered to the public, raising more than $200 million. Total number of units in issue is around 2.3 billion so it had a market capitalization of around $2.3 billion after listing.

Forecasted yield based on IPO price : 5.12% for 2009 and 9.82% for 2010

What is unique about this trust is that the IPO took place while the buildings were still in development and thus the forecasted yield was based on estimated (potential) rental income. Which is also one reason why it was listed as a business trust and not a REIT. Business trusts have more flexibility when it comes to how much of its project can be under development.

Zero dividends paid

The share price of Indiabulls (IPIT) plummeted very quickly after listing.

There were issues with the construction as well as the ability to attract tenants based on the projected rates. As a result, no dividends could be paid.

Investors who bought into the IPO based on the projected yield were left to hang high and dry.

Rights Issue of 1.25 billion shares at $0.16 in Oct 2009 to raise $200 million

At the point when the rights issue was announced, the price of Indiabulls (IPIT) share was trading at around $0.30. Which meant that IPO investors would have already lost 70% of their value. As it turned out, those who subscribed to to the rights will eventually lose even more money as the price continued to drop below the rights price.

Maiden dividend declared in 2012

IPIT started paying dividends towards the end of 2012.

If you thought that investors can finally start to celebrate, you might want to know that the first distribution was $0.000131 (13 cents per 1000 shares), giving an annualized yield of ???!!!

The NAV per share then was around $0.40 and there were 3.7 billion shares in circulation after the rights issue.

Share Consolidation of 5 shares into 1 in 2015

By then, IPIT shares were trading at around $0.10. Since they had to comply with the SGX minimum trading price rule, a 5 to 1 consolidation was proposed. This meant that a holder of 1000 units would end up with 200 units. Theoretically, the price of the share was supposed to trade at around $0.50 after consolidation.

After consolidation, the price went down all the way to $0.20 and on certain days going under $0.20.

116martinleeTo add insult to injury, it was announced on 29 April that the public float has fallen below 10% and there was no intention to place out new shares to increase the public float. If this remains the case, SGX can suspend the stock from trading.

-- Martin Lee (photo)

Mandatory Cash Offer of $0.25

On 27 April 2016, it was announced that Grapene, a subsidiary of Indiabulls Real Estate Limited, has increased their stake and that has triggered a general offer. The price offered was $0.25.

An IPO investor would be getting back $0.05 for each dollar that he invested after factoring in the share consolidation. This is a 95% loss. If he had subscribed to the rights at $0.16 (post consolidation price of $0.80), he would have lost 69% on that.

To add insult to injury, it was announced on 29 April that the public float has fallen below 10% and there was no intention to place out new shares to increase the public float. If this remains the case, SGX can suspend the stock from trading.

Which means that shareholders are kind of forced to accept the offer. Even if they don’t and the offeror manages to procure 90% of the shares, they will proceed to exercise their right to compulsorily acquire all the rest of the shares.

What an end to Indiabulls Investment Property Trust!

Gored to death (nearly)
If you had bought at IPO for $1.00 Your loss (based on mandatory offer price):  95%*
If you had bought at IPO for $1.00 & subscribed for rights, your cost is 70.9 cts a share (pre-consolidation). Your loss (based on mandatory offer price): 93%*

* Does not take into account small amounts of dividends paid.
Mandatory offer price is 25 cents, which works out to 5 cents pre-share consolidation. 


This article is republished from Martin Lee's blog with permission.

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