Bengaluru: Rising Straits Capital, the asset management firm founded by Subhash Bedi, has set up a real estate-focused non-banking financial company (NBFC) to lend funds to cash-strapped developers, mimicking moves by private equity investors.
Rising Straits has acquired an existing NBFC and is raising around $100 million from a financial investor to capitalize the NBFC, which has been named Rising Straits Finance Co. Pvt. Ltd. The NBFC will start lending operations from the beginning of 2017 with around $150 million, including capital infused internally.
Apart from the regular residential and office projects, the new NBFC will also lend to projects in the logistics, hospitality and healthcare sectors.
“Traditional banking channels are unable to fill the funding gap in the sector today, which is why so many NBFCs are coming up. NBFCs are stepping in to address those gaps,” said Bedi, chairman and managing director, Rising Straits Capital.
Bedi, who also co-founded Red Fort Capital, said that the NBFC will take off with $100-150 million and then increase it to about $300 million of debt.
Mint wrote in a 13 September article that Rising Straits Capital was in the process of acquiring an NBFC.
Rising Straits is currently also raising capital from offshore investors, through the managed account route, to invest in real estate projects. In a managed account, a few large limited partners (LP) participate, instead of multiple investors in a blind pool format.
“So far we have got commitment of around $300 million. We will be investing in both residential and office projects, that are in early stage or under construction,” Bedi said.
This would be Rising Straits’ first fundraising after it was formed last year, following a separation between Red Fort Capital co-founders Bedi and Parry Singh.
As part of the separation, Bedi sold his stake in Red Fort Capital’s NBFC.
There has been a slew of new real estate NBFCs entering the market. NBFCs, which primarily offer debt through various structured instruments, today are directly competing with private equity (PE) funds, with the latter mainly doing debt and non-equity deals. With NBFCs getting aggressive, real estate developers now have greater access to capital though the money comes at a high price.
“NBFCs provide innovative financing and flexible repayment terms that banks typically, don’t offer. They have a risk and reward approach and their lending rates may vary on a project-to-project basis depending on the credibility of the developer, track record, project status etc,” said Nikhil Bhatia, MD of capital markets India at property advisory CBRE Asia Pvt. Ltd.