New Delhi: Bangalore-based property developer Shriram Properties Ltd is looking to raise $300 million (around Rs1,220 crore) through a stake sale to private equity (PE) firms to fund its expansion into newer markets such as Gurgaon, Mumbai and Ahmedabad.
The company is in talks with PE firms such as Walton Street Capital Llc., Starwood Capital Group, Goldman Sachs, SUN-Apollo Real Estate Advisors and JPMorgan to offload equity at project-specific level, which typically involves setting up a special purpose vehicle (SPV), or a company built around a specific project.
“We plan to invest $300 million during the next year to expand our operations,” M. Murali, managing director of Shriram Properties said. “We will take the private equity route to make the investment.” The firm is looking to dilute up to a 50% stake at the SPV level.
When contacted, SUN-Apollo declined to comment on the investment. “As an existing partner of ours, we are in regular communications with Shriram Properties on various projects. We cannot offer any further comment,” Chetan Dave, chief executive and managing director of SUN-Apollo Real Estate Advisors said. An email to the rest did not elicit any response.
Shriram Properties, a predominantly Bangalore-based developer, has recently started operations in Chennai, Coimbatore, Kolkata and Visakhapatnam. It now plans to expand into the north and west of the country.
“We see a lot of opportunities for real estate development in the National Capital Region and Ahmedabad, as the government there is investing in improving infrastructure,” Murali said.
The company already has an existing relationship with funds sponsored by Walton Street Capital and Starwood Capital. The firms have picked up a 33% stake each in Bengal Shriram Hi-Tech City Pvt. Ltd, an SPV that has been set up by Shriram Properties to develop a Rs5,000 crore integrated township on the outskirts of Kolkata.
Walton Street Capital has also picked up a 20% stake in Shriram Properties.
US-based SUN-Apollo, a joint venture company between New Delhi-based Khemka family and the US-based Apollo Real Estate Advisors that manages equity funds, also has a 50% stake in a real estate project being implemented by Shriram Properties near Chennai.
According to data from the Securities and Exchange Board of India, the nodal capital markets regulator in the country, PE investments in Indian real estate from domestic and offshore PE capital investors touched $912 million at the end of September 2007.
The total PE investments that have come into the Indian real estate sector since September 2006 is $4.23 billion.
PE firms especially prefer investing in cities such as Chennai and Kolkata as land cost in these cities is relatively cheaper (when compared with that in New Delhi and Mumbai) and PE firms can get a better valuation.
Shriram Properties is also looking at an initial pubic offering (IPO) in the next six-nine months.
“We are looking at a listing in the first or second quarter of 2009,” Murali said.
He did not say how much the company was planning to raise from the IPO as it was still in early stages of planning. The company is, however, not looking at offloading further equity before the IPO.
The Rs450 crore Shriram Properties is part of the Rs25,000 crore Shriram Group that has business interests in real estate, truck financing, insurance, consumer finance and information technology.