Is Mindspace Business Parks REIT IPO Shariah Compliant? Check Shariah Stock status report of Mindspace Business Parks.
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Shariah Stock Status Report :: Mindspace Business Parks REIT:: INDIA :: NSE :: BSE :: 23rd July 2020

TICKER

TBA on Listing

Company Name

Mindspace Business Parks REIT (IPO)

Shariah Compliance

NOT COMPLIANT

DP RATIO

27.10%

Business sector screening:

Mindspace Business Parks REIT is an entity jointly backed by private equity major Blackstone Group and realty developer K Raheja Corp.
The Company’s portfolio as on 31st March 2020 includes a total leasable area of 29.5 million square feet with 10 Office Assets and 170+ tenants. The company's property portfolio essentially comprises of five integrated business parks and five quality independent offices in Mumbai Region, Hyderabad, Pune and Chennai.

The tricky areas from a Shariah perspective for a REIT:
The revenue derived from non-permissible tenants needs to be reviewed:
Review the tenant portfolio for:
- Conventional Financial services providers such as banks/Insurance companies. Even thier in-house backend processing is considered non-compliant
- Entertainment venues such as theaters and Cinemas
- Casinos
- Hotels and resorts serving alcohol, pork, tobacco products as well as for housing night clubs.
- Restaurants/Bars/clubs selling alcohol, pork and tobacco
- Retail stores/supermarkets selling alcohol, pork, tobacco, music

MINDSPACE Business Parks REIT Tenant portfolio:
The company's portfolio consist of only office buildings. Hence, tenant profile of the same needs to be analyzed.
The company states that its largest tenants include affiliates of Accenture, Qualcomm, BA Continuum, JP Morgan, Amazon, Schlumberger, UBS, Capgemini, Facebook, Barclays and BNY Mellon.
The ten largest tenants contributed 41% of total revenue and no single tenant contributed more than 8.7% of total revenue.
The company states that tenants from Financial Services sector contribute 18.8% of its Gross contracted rentals and occupies 16.8% of its leased area as on 30th June 2019.
Mindspace Business Parks REIT Prospectus further elaborates that companies from the conventional financial services sector like Bank of America Continuum, JP Morgan, and UBS contribute 3.3%, 3.3% and 2.5% of Gross Contracted Rentals respectively as of 30th June 2019. These three named conventional financial services sector tenants contribute 8.8% revenue for Mindspace Business Parks REIT

Let's analyze the revenue streams of Mindspace Business Parks REIT to ascertain its business sector compliance from a Shariah perspective

Segment break up

Operating Revenue in Millions of INR for Year ended 3oth June 2019

Segment Description

Segment Revenue

Non-permissible Revenue

% non-permissible revenue

Non - permissible segment classification

Facility rentals

₹ 2,883

₹ 542

18.80%

Revenue from Conventional Financial services tenants

Maintenance services income

₹ 727

Revenue from power supply

₹ 117


Other operating income

₹ 32

TOTAL

₹ 3,759

₹ 542

14.42%

Total Revenue

₹ 3,759

Non-permissible Operating revenue

₹ 542

% of non permissible revenue

14.42%

Since the revenue from non-permissible operating income of the company is more than 5%, Mindspace Business Parks REIT FAILS the BUSINESS SECTOR Screening

Sector Compliance

FAIL

Non-operating Revenue in Millions of INR for year ended 30th June 2019 - Other Income

Segment Description

Segment Revenue

Non-permissible Revenue

% non-permissible revenue

Non - permissible segment classification

Other income (including interest income)

₹ 654

₹ 654

100%

Interest Income

TOTAL

₹ 654

₹ 654

Dividend Purification calculation

Revenue Description

Non permissible Revenue (millions of INR)

Non-permissible operating revenue

₹ 542

Non-permissible non-operating revenue

₹ 654

Total Non-permissible revenue

₹ 1,196

Total Revenue of the Company (Gross)

₹ 4,413

Dividend purification ratio

27.10%

"This will not be displayed in Islamicly as the sector of the company is non-compliant i.e. investment in this stock is not permissible hence dividend purification would not be applicable"

Financial Ratio Screen:

(All figures in millions of INR as on 30th June 2019)

Particulars

Amount

Remarks

Estimated market value based on issue price band

₹ 2,36,750

This is estimated by considering the total outstanding shares with the higher band of the issue price. Upon listing, please check the current compliance of the stock on Islamicly

Total Debt

₹ 62,432

Islamic Debts


Adjusted Debts

₹ 62,432


Debt Ratio

26%

Within limits

Cash

₹ 502


Cash Ratio

0.21%

Within limits

Accounts Receivables

₹ 28,695


Accounts Receivables Ratio

12%

Within limits

Since all the Ratios are within the limit, the stock passes the Financial ratios screen

Financial Ratio compliance

PASS

Source:
All the above information is based on the company website and the IPO prospectus of the company.
Conclusion:
Given the above information, we believe Mindspace Business Parks REIT (IPO) is a Shariah NOT COMPLIANT company as per the Shariah screening Criteria.

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