BackAffordable housing company VBHC raises funds via rights issue
Investors, including the Carlyle Group and IFC have subscribed to the issue, along with a few other wealthy investors
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Bangalore: Value and Budget Housing Corp. Pvt Ltd (VBHC), started by entrepreneurs Jaithirth Rao and P.S. Jayakumar, has raised ₹ 65 crore through a rights issue.
Investors, including the Carlyle Group and International Finance Corp., part of the World Bank Group, have subscribed to the issue, along with a few other wealthy investors.
Rao has invested his own capital in this fresh round of fund-raising, but didn’t disclose further details.
The money will be used to forge joint development deals for new projects in Bangalore and Mumbai, VBHC chairman Rao said in an interview.
“We opted for a rights issue because we didn’t wish to look outside to raise money and decided to approach our earlier investors," he said.
A rights issue to a company’s shareholders entitles them to buy additional stock from the firm in proportion to their existing holdings.
VBHC, which has offices in Mumbai and Bangalore, raised around ₹ 60 crore from IFC in May 2013. Before that, it had raised $26 million from the Carlyle Group in 2011.
Carlyle Group declined comment on the rights issue.
In 2010, VBHC launched its first project near Bangalore, with 1,500 homes.
“We have seven projects running now—in Bhiwadi, Chennai, Bangalore and Mumbai—and want to add another four to five projects in the coming year," said Rao.
“We would have definitely wanted to add many more projects by now, but the overall regulatory environment is hostile to affordable housing, making it difficult for us to add momentum."
VBHC homes cost around ₹ 10-25 lakh on an average.
The housing firm recently launched a high-end project in Bangalore’s Whitefield area in a joint venture arrangement with apartments priced at around ₹ 50 lakh each, marking a departure from its sole focus on budget homes.
Rao said the management is still deliberating on whether there will be a strategic move to build homes in the premium category, too, largely owing to the higher profitability of this business, but the Whitefield project remains the only such in VBHC’s portfolio.
“Low-cost housing projects have been a mixed bag, with some of them taking off well in certain cities," said Rajeev Bairathi, executive director, capital transactions group and north India at property advisory Knight Frank India. “The key to successful affordable housing ventures is availability of large and cheap land parcels, because it’s a high volume-low margin business."
Bairathi says such projects have to come up in peripheral areas of cities, so there is a need for huge infrastructure development to make them viable and accessible.
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