Back‘Embassy has raised nearly `2,400 crore without an IPO’
Chairman and managing director Jitendra Virwani speaks about factors the company got right and growth strategy
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Bangalore: Like many other real estate firms, Bangalore-based Embassy Property Developments Ltd decided against an initial public offering (IPO) after filing a draft red herring prospectus in 2010. But while many of the other firms have struggled to raise capital, Embassy has tapped some large private equity funds, including Blackstone Group LP, and struck some of the sector’s largest deals.
The 27-year-old company has completed 62 commercial office projects of around 24 million sq. ft and 19 residential projects. This year, Embassy ventured into logistics and warehousing, forming a joint venture with Maini Group to develop logistics parks in Karnataka at an estimated investment of ₹ 15,000 crore.
In an interview, Embassy chairman and managing director Jitendra Virwani spoke on factors the company has gotten right, its growth strategy, and wanting to remain a south India-based developer. Edited excerpts:
After deciding not to go public, you have been on a fund-raising spree. How much capital have you raised?
Two years back, we were planning to do a ₹ 2,400 crore IPO largely for growth capital, but markets were not conducive. Embassy has raised nearly ₹ 2,400 crore since without an IPO, largely from various funds such as Blackstone and HDFC (Property Fund) in the last year or so. We have recently raised ₹ 1,015 crore from Blackstone, and before that, about ₹ 900 crore in two other projects. From HDFC’s fund, we raised about ₹ 400 crore in two other projects in Bangalore.
Blackstone has done multiple deals with Embassy Property. How did this partnership happen when global funds are so cautious to invest in Indian real estate firms?
When a fund such as Blackstone and HDFC does multiple deals, it shows there is a lot of faith. There are various factors that play a role such as transparency, the management of the company, how professionally it is run, and importantly, how we have performed so far and whether as a developer, we have executed what we set out for and delivered.
Blackstone recently invested 1,015 crore in this new company or special purpose vehicle (SPV), Pune Dynasty Projects Pvt. Ltd, in which Embassy is a joint venture partner. What exactly will the SPV do?
The SPV has been formed with three IT (information technology) projects that are currently being developed by Embassy. But going forward, the SPV will also acquire projects, mostly lease rental generating office assets, from other developers too. We will invest at least ₹ 450-500 crore in each transaction. For example, it is looking to invest around ₹ 680 crore in a leased office asset in Bangalore, of around 800,000 sq.ft.
Does this mean Embassy will act as an investor partner of sorts with Blackstone? What is the long-term strategy for Pune Dynasty?
Yes, it would play a similar role of an investor partner. Eventually, in about 5-6 years, we would want to list it (the SPV) as a REIT (real estate investment trust), business trust or as an IPO to unlock the value of the assets.
For the past decade or so, Embassy has done a slew of office developments such as IT parks. Is it a strategic decision to do residential projects now?
Embassy started with high-end residential development many years back, and then we moved onto developing office spaces. About a year back, we decided to do residential again. So, while commercial office will remain a major part of our portfolio, we are developing about 5 million sq. ft of residential space, mostly in the high-end, luxury segment. We believe there is a lot of demand for such properties in Bangalore itself. We launched a villa project, Lake Terraces, recently, where the price of a villa is around ₹ 3.5 crore onwards, and the response was great. The buyer profile doesn’t even constitute NRIs, they are all local Bangaloreans wanting a second or a better home.
Despite a substantially large portfolio of projects, you have primarily chosen to remain in Bangalore and in the south. Don’t you have national ambitions as a developer?
I don’t think it is advisable to go pan-India. I am comfortable doing projects in a few cities, be it Bangalore, Chennai or Pune. But we shall selectively look at projects in cities. So, for example, we are looking at a project prospect in Mumbai now, so if something good comes up in a city, we will take it up. However, northern India is not somewhere we would wish to go now as the market is different and a bit politically driven there.
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