Mumbai: Real estate developer Akruti City Ltd is investing Rs2,000 crore to set up universities in Navi Mumbai and Ahmedabad but says its focus remains on its core business of real estate at a time when growth in this business has been crimped by falling demand and tighter credit.
“Though completely unrelated to real estate, we have been contemplating some initiatives in the education sector for a long time,” said Hemant Shah, chairman of Akruti City. US-based architects Ayers/Saint/Gross have been signed on to design the universities.
Akruti, which is a large player in the slum redevelopment business, has already identified 400 acres in its possession for this purpose. “The job becomes easier and more financially viable when you already have the required land in place,” said Mahesh Laxman, regional director at real estate advisory Jones Lang LaSalle Meghraj, who added that land is usually the biggest cost in such ventures.
Akruti has a land bank of around 909 acres.
Akruti City had announced earlier this year that it would raise Rs1,500 crore by selling a 16% stake to private equity funds run by Citi Venture Capital International and American Investment Group Inc. The deal, subsequently, fell through because of uncertain market conditions and delays in getting requisite approvals from the government.
“We have enough capital to sustain our expansion plans for the coming year. Raising funds is not on our immediate horizon,” said Shah.
Akruti is now waiting for approvals from education sector regulator, the All India Council for Technical Education, for the projects. It has also applied to the University Grants Commission (UGC) for a so-called “deemed university” status for the Navi Mumbai project.
Mint reported on 27 July that 104 universities have been granted the coveted deemed status by UGC, even as 177 others are in the queue. A deemed university can largely act free of government interference not only in deciding the syllabus, but can also decide on admissions and fees.
Akruti is also investing Rs250 crore in its new agri-logistics business. It is setting up warehouses in nine locations.
“Warehousing is a low-return business compared to businesses such as retail. But developers having a substantial land bank are getting into warehousing despite low returns,” said Laxman.
Akruti City says it has also been talking to various international companies to form joint ventures for different projects. It was in talks for a 50:50 joint venture with Pacific Alliance Group, a construction and township development firm, but Shah said nothing has been finalized so far.
The company also continues to pursue its slum redevelopment business, and is part of one of the 19 consortia that have qualified for the Rs13,000 crore Dharavi redevelopment project. If selected, Akruti’s consortium will be allowed to develop one of the five sectors in the project.
On Thursday, shares of Akruti lost 3.48% to close at Rs868.80 each on the Bombay Stock Exchange on a day when the benchmark Sensex index fell 2.31% to 14,324.29 points.
The firm ended 2007-08 with revenue of Rs4,704 crore and a net profit of Rs2,992.33 crore.