A Reuters report showed that the book-building process saw PropertyGuru shares offered at the lower end price of A$3.70. It gave the company a total A$1.16 billion ($790 million) market capitalisation, a valuation that analysts said was too frothy.
Global Equity Research’s George believes that the company is, at best, valued at the lower-end. Aequitas Research’s Singh thinks the company is worth at least 30% below the low-end, if not lower.
Such circumstances left TPG Capital and KKR with two options—discount the IPO or scrap things altogether to wait it out. Eventually, it chose the latter.
The high end translates to A$380.2 million ($260 million).
A private equity executive who invests in real estate told us that the decision was unsurprising. In addition, unlike many other companies that are going public in Asia, PropertyGuru did not have cornerstone investors to give the deal a much-needed confidence boost.
“Private equity investors would rather take unrealised losses at the moment with a potential for huge gains in the future than realise a small gain from an immediate exit,” she said.
In the fast-moving world of investment, patience is a luxury. And in this case, it is a luxury that TPG and KKR together—jointly holding an aggregate 58% stake in PropertyGuru—can afford.
Is second time lucky?
Both investors entered into voluntary escrow arrangements until February 2021, and are not looking to sell down their holdings in the company, although their shares will be diluted should the IPO proceed. Only its Indonesian investor Emtek Group was to sell down some shares, cutting its holding from 15.5% to 7.33%.
“I’d imagine these investors have a long horizon on the investment because you need to be very patient and familiar with Asia. So it’s not surprising that the environment has turned out to be not as attractive as what they had thought,” said Reshmi Khurana, the managing director and head of Southeast Asia for risk consulting firm Kroll.
There also seems to be some stigma that comes with PE investments as any business they touch is under pressure to realise value for its investors or limited partners.
So, is it all doom and gloom for those who have PE investors on their cap table? Khurana argued that globally, PE is now a mature industry that has a very long and established track record of adding value to companies.
“But not every company is suitable for PE because there’s a certain method to how they invest. These investments, by definition, are time-bound. So at some point, there is a need to exit, but that’s not a negative. That’s just the nature of PE.
“To me, it’s not about PE putting companies in a difficult position. It’s how companies and investors, knowing the limitations and advantages of private equity investment, prepare to exit,” Khurana said.
It might be another year or two before PropertyGuru will attempt to go public again, said one of the sources quoted above. Based on its prospectus, as on 30 October, without the funding from the planned IPO, PropertyGuru is left with about S$22.6 million ($16.61 million) cash reserve and S$10.6 million ($7.8 million) in other current assets in its coffers.