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Photo: Bloomberg
Photo: Bloomberg

Blackstone may invest Rs300 crore in Paranjape unit

Talks at due diligence stage; move highlights PE firm's intentions to get into development of real estate projects

Global private equity investor Blackstone Group Lp is in talks to invest about 300 crore in a group company of Pune-based real estate developer Paranjape Schemes Construction Ltd, two people aware of the development said.

“Blackstone is in talks to invest up to 300 crore in a group company of Paranjape. Blackstone’s investment will essentially be for construction and development of the project, which is a first for the private equity firm that has been coming on board as a financial investor," said the first person cited above, requesting anonymity as the talks are private.

The talks are at the due diligence stage right now and the deal is expected to close by the end of August, he added.

Founded in 1987, Paranjape Schemes has developed real estate projects in Pune, Mumbai, Bengaluru, Nashik and other cities. The company claims on its website that it has completed at least 165 projects.

“As a matter of policy, Blackstone does not offer any comment on market speculations," said a spokesperson for Blackstone. Emails sent to Shashank Paranjape, managing director of Paranjape Schemes, and the firm went unanswered.

Since entering India in 2006, New York-based Blackstone has committed almost $2.7 billion in the country across 18 transactions through its realty investment arm, which has a team of about 11 professionals in India.

Investments made by Blackstone in 2015 included buying Oxygen, a special economic zone (SEZ) in the National Capital Region from 3C Company for around 620 crore and a commercial office project in suburban Mumbai for 1,060 crore from HCC Real Estate Ltd and IL&FS Milestone Realty Advisors Pvt. Ltd.

Paranjape Schemes filed for an initial public offering with the Securities and Exchange Board of India (Sebi) on 9 July 2015. The proposal was cleared in December, but the company is yet to launch its IPO.

Starting with residential projects in Pune in the late 1980s, Paranjape Schemes has over the years expanded into several segments such as commercial real estate and hospitality.

In 2014-15, Paranjape Scheme reported consolidated revenue of 375.6 crore, compared to 581.1 crore in the previous year, according to data from the company’s draft red herring prospectus filed with Sebi. Consolidated net profit was 14.3 crore, as against 26.6 crore in the previous year.

Paranjape has been an early mover in the niche segment of senior living. The company also has a big focus on affordable housing.

The real estate firm developed its first senior living project, Athashri, in Pune and is currently developing one at Vadodara. It plans to invest approximately 250 crore in its projects for senior citizens and 200 crore for affordable housing around Pune and Mumbai, Mint reported in June 2015.

The senior living segment represents a key opportunity as such homes are in short supply.

According to a June 2015 note by real estate consulting firm Jones Lang LaSalle India, there are approximately 30-35 senior living projects in the country. “Unfortunately, this represents a major shortfall: they accommodate only 0.0001% of the target segment (India’s senior citizens) as compared to 10% in the US and approximately 4% in Australia. India currently contributes less than 1% to the global senior living industry, highlighting the huge demand and supply gap of the sector—and its implied growth potential," the note said.

Private equity investments in the real estate sector witnessed a sharp jump in 2015.

According to the Bain & Co. India Private Equity Report 2016, private equity investments in the real estate sector grew to $3.9 billion in 2015, compared to investments worth $2.2 billion in 2014.

Moderation in real estate prices and easing of the regulatory environment, such as permitting 100% FDI in real estate, were some of the factors that contributed to the spurt in private equity interest in real estate, the report had said.

According to industry experts the real estate sector is witnessing a recovery, attracting investors to the sector and which, going ahead, will help developers on the pricing front.

“The industry is witnessing positive consolidation of volume in key markets and downward pressure on prices is expected to be muted going ahead, which will give developers the confidence to push the price upwards as demand picks up and stabilizes," said Bhadra Kanaiya, executive director with advisory firm Euromax Capital.

But Kanaiya added that developers will have to focus on deliverables in terms of project completions, rationalization of prices and fostering more confidence of investor by cleaning up the balance sheet—thereby allowing more liquidity options.

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