Shriram Properties to raise Rs1,000 crore from PE funds this year
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Bengaluru: Shriram Properties, part of the conglomerate Shriram Group, is planning to raise around Rs.1000 crore from private equity (PE) funds this year as it prepares to launch new residential projects, said a top company executive.
The Bengaluru-based company raised around Rs.900 crore last year for various projects, including an entity-level investment of Rs.468 crore by Tata Opportunities Fund, the flagship private equity fund of Tata Capital Ltd, which had picked up an 18% stake.
In the next few months, Shriram Properties will launch five residential projects in Bengaluru, three in Chennai, and one project each in Visakhapatnam and Coimbatore.
“We won’t raise capital by diluting stake in the company now, but we will raise at least Rs.1,000 crore this year for a number of new projects that we will launch. We will also use this money to cash out in existing projects and use that money in other projects,” managing director M. Murali said.
Shriram Properties has raised Rs.67 crore from India Realty Excellence Fund II, managed by Motilal Oswal Real Estate Investment Advisors Pvt. Ltd, in what is probably the developer’s first fund-raising activity of 2015.
The capital has been invested for the development of a 19.5-acre, mid-income residential project called Greenfield, located off Old Madras Road in Bengaluru. Launched a month and a half back, the project is a joint venture development with Garden City Reality Pvt. Ltd, the landowner from whom Shriram Properties has bought the land. The transaction was announced on Tuesday.
“We value the investment from Motilal Oswal Real Estate Fund, which has enabled us to unlock the land bank potential and will not only strengthen us financially but also provide us a spring board to launch into the next cycle of our growth,” said Murali.
“We are positive on the Bengaluru residential real estate market, particularly mid-income housing segment, due to the sustained absorption level backed by affordable prices and expansion of IT/ITeS sector,” Sharad Mittal, director and head, Motilal Oswal Real Estate, said in a statement.
But Shriram Properties, which was planning an initial public offering (IPO) sometime this year, may just push it to next year now. “We are waiting for the budget and also want to see how the capital markets react to real estate this year. We don’t want to rush into it and will probably look at an IPO only next year,” said Murali.
Real estate funds are expected to raise nearly $1.5 billion in the first half of this year, according to Mint estimates. In a slowdown scenario, where sales are slow in large property markets such as the national capital region and Mumbai, developers are looking to raise money for a number of reasons—make land payments, pay off debt and refinance earlier borrowings, project completion and to start new projects.
“There is no dearth of liquidity to fund developers. Even then, investors would not want to part with money where cashflows are not visible and there is an oversupply situation,” said Rajeev Bairathi, executive director, capital transactions group at property advisory Knight Frank India.
“However, with a gradual recovery in real estate, the risk perception will also come down and investors will be more willing to lend to the sector.”