Mumbai: Despite an improvement in India’s private equity (PE) market, overseas realty funds are finding the going tough as investors pull back money to cover trading losses in their home markets. Real estate-focused PE funds of banks such as Credit Suisse Group AG, Morgan Stanley and Citigroup Inc. have either shut down or put their Indian and Asian operations on sale. US-based PE firms Oxif Capital Management and Angelo Gordon and Co. have shut operations in India. Many other PE investors have also put their plans on hold.
Waiting game: (left) Actis Advisors’ J.M. Trivedi and Saffron Asset Advisors’ Ajoy Veer Kapoor.
“In 2005-06, there were 400-odd foreign investors targeting real estate, of which 250 had managed to register, 150 had applied for registration, of which today 40-odd exist,” said Amit Goenka, national director, capital transactions, at property advisory Knight Frank (India) Pvt. Ltd.
Fund infusion is down from an estimated $20 billion (Rs90,800 crore) to just $2 billion, an erosion of 90%, he added. Goenka blamed the shrinking market on foreign limited partners (LPs), on whom PE funds depend for money, trying to make up for trading losses at home.
PE investment, excluding real estate, declined from 453 deals worth $10.29 billion in 2008 to 263 deals worth $4.02 billion in 2009, while PE investments in real estate declined from 90 deals worth $6.64 billion in 2008 to 26 deals worth $950 million in 2009, according to Venture Intelligence, a Chennai-based research service that focuses on private equity and mergers and acquisitions.
In September 2007, Actis Advisors Pvt. Ltd had planned to set up its first India-focused real estate fund with a corpus of $250-300 million. It had put in place a real estate fund team headed by Chanakya Chakravarti, former joint managing director of Cushman and Wakefield Inc., a real estate consultancy.
But the team was dissolved last year, with Chanakya moving as chief executive to Indian Ocean Real Estate Co., a portfolio company of Actis.
“Two members of the India RE (real estate) team are part of (the) India team and based in Mumbai,” said J.M. Trivedi, partner and head of Actis-South Asia, by email.
A spokesperson said Actis remained interested in Indian real estate opportunities and the team was assessing investments as the market improves.
Saffron Asset Advisors, a real estate fund listed on London Stock Exchange’s Alternative Investment Market, said three weeks ago that it had deferred plans to raise funds targeting investments in hospitality, logistics and infrastructure. Last year, the company had announced its intention of raising these sector-specific funds by 2010.
“We have always said that we would raise funds at the appropriate time, and appropriate time is a function of many moving parts,” said Ajoy Veer Kapoor, founder and managing director, Saffron.
“For now, we are absolutely focused on ensuring that we create value for the current funds that we manage,” he added. He did not say for how long plans had been deferred.
Instances such as the feud between London-listed realty PE firm Trikona Trinity Capital Plc and its portfolio advisers over the firm’s efforts to terminate their agreement in advance will also make it difficult for firms to raise money from foreign investors in future.
Institution-backed domestic PE funds will stand to gain from this, said Vikas Chimakurthy, director of the realty fund at Kotak Investment Advisors Ltd, as LPs would prefer them over first-time funds or individual-backed funds.