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Puravankara Projects to raise 150 cr via NCD issue

Puravankara Projects to raise 150 cr via NCD issue

Bangalore: Puravankara Projects Ltd will raise 150 crore by selling non-convertible bonds to build a housing project in Bangalore and repay debt.

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The developer had raised the money from Kotak Mahindra Bank Ltd ’s non-banking financial company (NBFC). This time, it will sell non-convertible debentures (NCDs) to select investors without any underwriting, a Puravankara spokesperson said.

This year, Bangalore-based developers including Century Real Estate Holdings Pvt. Ltd and Golden Gate Properties Ltd

have sold non-convertible bonds, raising about 300 crore for pre-development of land and project execution.

Jackbastian Nazareth, chief executive of Puravankara Projects, said the latest transaction will be a combination of debt repayment and project development.

Kotak Mahindra Prime Ltd will advise Puravankara on the bond sale.

Puravankara will employ the best possible capital structure for its projects in 2012-13 keeping in mind their development horizons, and will maintain a mix of debt and equity, Nazareth said.

Property analysts estimate real estate firms raised about 3,500 crore last year through bond sales, and a similar sum to be raised in 2012.

In 2011, PE funds and NBFCs together invested $1.43 billion in the real estate sector, according to VCCEdge, a research platform that tracks investments. In 2010, they had invested $1.3 billion.

Brickwork Ratings India Pvt. Ltd, which has a A-(structured obligations) rating on Puravankara’s latest issue, said it has factored in the company’s branding—the benefits of a dual-market positioning strategy between affordable and premium housing and the underlying assets that are proposed to secure the bond sale.

The rating represents a low credit risk. “The rating is, however, constrained by project risk and risk of sustainability of property prices and margins," Brickwork said.

Ambar Maheshwari, managing director, corporate finance at property consulting firm Jones Lang LaSalle, said in an interview that demand for capital from NBFCs will remain high this year too, with developers looking at various ways to raise capital.

“With a lot of exits from private equity firms, developers would need short-term bridge financing, for which they will fall upon NBFCs," said Maheshwari. “However, NBFCs will become more selective because most of the existing ones have already taken substantial exposure and the new NBFCs being planned will take some time to come in."

An executive with a large NBFC that focuses on the real estate sector, said on condition of anonymity, that the biggest challenge today is that NBFCs themselves are struggling for liquidity and to raise capital to lend.