Bangalore: Nitesh Estates Ltd is in advanced talks with private equity (PE) firms to raise Rs.400 crore for a clutch of residential projects—the real estate firm’s first big fund-raising since it listed its shares on the bourses two years ago.
The company will raise the money through a subsidiary, Nitesh Housing Developers, for a residential platform that will develop the projects, chairman and managing director Nitesh Shetty said in an interview.
The Bangalore-based developer, which is building the country’s first Ritz-Carlton hotel in the heart of the city, will launch five projects across price categories this financial year. These include two luxury residential projects while the rest will be priced at about Rs.4,500 a sq. ft. Earlier this year, Nitesh launched a luxury villa project, Napa Valley, in Bangalore.
“Residential projects are the flavour of the season due to their self-liquidating nature and there are takers for such assets,” said Karun Varma, managing director, Bangalore and Kochi, Jones Lang LaSalle India, a property advisory. “Location, positioning of the project and the pricing would also play key roles in funds investing in this space.”
Property consultants have reiterated that despite the overall real estate market in India being slow in terms of sales and project launches, Bangalore has bucked the trend with a slew of mid-market launches and robust sales from actual users.
The decade-old realty firm, funded by a number of PE firms before its Rs.495-crore initial public offering in 2010, plans to provide an exit to HDFC Asset Management Co. Ltd by the end of March by buying back its stake.
HDFC AMC invested Rs.80 crore for a 11% stake in a subsidiary special purpose vehicle in 2009.
This will be the fourth stake sale in Nitesh Estates by a PE investor, after two rounds by Och-Ziff Capital Management group Llc and one by HDFC Realty Fund, which sold its stake in a Bangalore mall project back to the developer last year.
Despite Nitesh Estates having a strong launch pipeline and a large residential portfolio, property analysts said delayed execution of projects by the company was worrying.
Nitesh Estates’s revenue rose 8.42% to Rs.30 crore in the quarter ended September, but its losses increased sharply from Rs.61 lakh a year ago to Rs.12.56 crore.
Shetty said project execution is being ramped up and close to 16 projects are under construction at various stages, with large contractors including Simplex Infrastructure Ltd, Ahluwalia Contracts India Ltd and Larsen and Toubro Ltd working on a bulk of them.
Changing its strategy of focusing primarily on residential projects, the developer is returning to office space development after a sabbatical.
It has formed joint ventures to develop four prime central business district office buildings with an annual revenue potential of Rs.100 crore, said Shetty. Each of these projects will be between 500,000 sq. ft and 1 million sq. ft in size.
As for retail developments such as shopping centres and malls, Nitesh is building a shopping mall in Bangalore’s Indiranagar area, for which the company obtained construction debt of Rs.300 crore from Bank of Baroda, Punjab National Bank and Corporation Bank last week.
The mall, expected to be ready in 30 months, is projected to fetch close to Rs.120 crore in annual rental income.
As the Ritz-Carlton hotel gets ready for a launch in the next 3-4 months, Nitesh Estates will also acquire land assets for potential development. It is in the fray to bid for the upcoming Four Seasons hotel and residences project.
Nitesh Estates rose 2.05% to Rs.13.47 on Wednesday on BSE, while the benchmark index Sensex gained 0.72% to 18,460.38 points.