BPTP seeks to raise $300 mn from PE firms

BPTP seeks to raise $300 mn from PE firms
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First Published: Wed, Sep 17 2008. 04 59 AM IST

Top floor: Kabul Chawla, managing director of BPTP, says the Noida project will be a true business centre based on the Canary Wharf model. Ramesh Pathania / Mint
Top floor: Kabul Chawla, managing director of BPTP, says the Noida project will be a true business centre based on the Canary Wharf model. Ramesh Pathania / Mint
Updated: Thu, Sep 18 2008. 10 11 AM IST
New Delhi: Real estate firm Business Park Town Planners Ltd (BPTP) is looking to raise $300 million (Rs1,389 crore) from private equity firms at a time when such money is becoming hard to come by for developers.
The company needs the money to finance the payment for the 95 acre plot it has bought in Noida, near Delhi, and for the development of a commercial property on this land.
Top floor: Kabul Chawla, managing director of BPTP, says the Noida project will be a true business centre based on the Canary Wharf model. Ramesh Pathania / Mint
BPTP, which claims to be talking to several private equity firms, says it is open to selling shares in the company itself or in a special purpose vehicle (or company) that has been formed for the Noida project.
Kabul Chawla, the managing director of BPTP, declined to comment on the private equity firms the company was in discussions with.
The Noida project is expected to cost Rs5,000 crore over the next five years. BPTP outbid DLF Ltd and Omaxe Ltd for the land, agreeing to pay Rs4,957 crore in what is considered India’s biggest real estate deal by overall value.
BPTP has paid 25% of this amount, or around Rs1,300 crore, from internal accruals, the sale of a 3% stake in the company for Rs250 crore to JPMorgan Chase and Co., and the sale of stake in special economic zones it is developing.
BPTP has to pay the balance for the land over eight years, in six-monthly instalments.
“We expect to have the land in our possession by this month or the next,” said Chawla. The company expects to start developing the land after March 2009.
Apart from JPMorgan Chase, Citigroup Property Investors has a 5.89% stake in BPTP, while Merrill Lynch and Co. has invested Rs112 crore in a joint venture between BPTP and one of its affiliates to develop an information technology project. Citigroup itself has a 40% stake in BPTP’s special economic zone projects, for which the investor paid Rs640 crore.
However, an analyst said it would be difficult for real estate firms to raise money through the sale of equity.
“Equity is very difficult to get in this kind of a market,” Shailesh Kanani, an analyst with Angel Broking Ltd said. “The question is, suppose BPTP does not get equity funding and if it has to fund the construction of the Noida project through debt, will the project be viable given the high interest rates?”
Chawla said that BPTP has less than Rs900 crore of debt on its books and added that banks are still lending money to developers. Analysts say such loans are usually at interest rates of 18-20%.
In Noida, BPTP plans to build 125,000 sq. ft across five office towers and a luxury hotel in the first phase of the project. Phase 2 will see the development of retail space.
Chawla claimed the Noida project would be India’s first and largest international business district and would attract a mix of tenants such as banks, financial institutions, IT companies and law firms.
“The idea is to build a true business centre based on the Canary Warf and Dubai Financial Center model,” he said.
Kanani said the development was coming up at a time when commercial property in New Delhi and its surroundings are going abegging.
“There are concerns of supply not getting absorbed and since this is a commercial project, cash flow for the company will start coming in only after the construction is done. So, till then the company will have to rely on debt and internal accruals,” Kanani said.
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First Published: Wed, Sep 17 2008. 04 59 AM IST