New Delhi: Real estate developer Ansal Properties & Infrastructure Ltd (APIL) is looking at reducing its promoter holding in the company to 55% from the current 66% through a combination of a follow-on public offer and private equity placements to raise funds for expansion.
The company plans to raise Rs1,000 crore through the sale of shares to the
Building ambitions: Ansal plans to use the funds raised to finance its existing real estate projects and future projects in the hospitality sector.
“We have not yet decided on the timing of the issue,” said chairman Sushil Ansal. “But, it is something that we are looking at.”
The company plans to issue fresh equity for the follow-on public offer. Ansal is also looking at private equity placements before the follow-on public offer. “We are in talks with private equity players,” Ansal said. Ansal Properties plans to use the funds raised for part-financing its existing real estate projects and future projects in the hospitality sector.
Tighter rules for lending to the real estate sector and a clampdown on external borrowings by India’s central bank have forced many real estate players to pump the equity market for funding. The exploding rise in property values in the last three years has caused concern that it may create an asset bubble which will burst and cause a financial meltdown.
Many real estate developers such as DLF Ltd and Omaxe Ltd have tapped capital markets to raise funds.
According to a Ficci-Ernst & Young report on the Indian real estate market, some 18 real estate and construction companies listed between August 2006 and August 2007, raising more than $4.36 billion.
Ansal Properties listed in 1993 and its shares have fallen nearly 40% this year. During this period, the company has also issued bonus shares.
The company also plans to raise around Rs1,200 crore ($300 million) by floating a hospitality fund in an overseas market to part-fund its foray into the hospitality sector. “It will most probably be listed in the US,” said Ansal.
The company is entering the hospitality market by floating a special purpose vehicle (SPV) with Ambience Hospitality Management Ltd, whose managing director, Vipin Luthra, is Ansal’s son-in-law.
“We are in talks with some leading international hotel chains. But, we can’t name them at this point,” Ansal said.
Ansal Properties will hold 80% equity in the proposed SPV and the balance will be held by Ambience Hospitality. The SPV plans to set up 30 hotels over the next 10 years at an investment of Rs2,000 crore.
The hotels will come up in North India, in tier II or smaller cities such as Amritsar and Ludhiana, and in suburbs of large cities, such as New Delhi. The projects will include business and leisure hotels, properties on Ansal’s golf resorts and heritage property.
While the SPV will own and manage the heritage property and golf resorts under its own brand, it is in talks with multiple international hotel chains for possible management and branding tie-ups for the business and leisure hotels.
Ansal Properties shares rose 2.7% to Rs268.45 on the Bombay Stock Exchange on Monday.