Home >companies >people >HDFC Property Fund invests in new deals, to raise another fund

HDFC Property Fund, which is currently deploying a $350 million (around 2,185 crore) offshore fund, has closed three transactions with developers in Mumbai, Pune and Chennai, even as it prepares to raise a new fund later this year, said people familiar with the development.

The fund, with investor partners New Vernon Capital Llc and Old Lane Partners Lp, has entered into an arrangement with Pune-based Kumar Properties Pvt. Ltd where it has got the latter on board as a developer partner for a 140 acre land parcel in Hadapsar, Pune. The Hadapsar land is valued at around 920 crore.

“We have given up our rights in a few special economic zones (SEZs) and IT parks that we had invested in, with Shapoorji Pallonji, and in lieu of that, we have got 100% control of this land," said an executive at the fund, who didn’t want to be named.

HDFC Property Fund and partners had invested in at least five such SEZs with Shapoorji Pallonji and Co. Ltd in 2007-08. The investors later gave up their stakes in these assets, and entered into an arrangement to acquire the Pune land.

“The plan is to develop a township on this land over a period of 12-15 years," said Manish Jain, managing director of Kumar Properties. The company, backed by Singapore’s sovereign wealth fund GIC, is a prominent developer with projects in Pune, Mumbai and Bengaluru.

Shapoorji Pallonji didn’t respond to an email query.

In another early-stage investment, HDFC Property has backed Mumbai-based Runwal Group’s acquisition of 24 acres of Crompton Greaves land in suburban Mumbai by subscribing to a 200 crore non-convertible debenture (NCD) issue. Runwal has already acquired eight acres and HDFC Property is funding part of the purchase of the rest. The 1,020 crore land acquisition was announced in 2014.

Subodh Runwal, director of Runwal Group didn’t respond to queries.

HDFC Property’s third transaction, which is yet to be completed, involves a 310 crore loan to Bengaluru-based Shriram Properties’ project in Chennai. The project has a 2 million sq. ft leased IT park and a 4 million sq. ft residential component. HDFC Property is investing in the latter.

Shriram Properties managing director M. Murli did not respond to a request for comment.

Most private equity funds are entering into debt-centric structured deals through the NCD route. There is a lot of demand for capital from developers, who need money to make payments for purchasing land, refinance expensive debt or for construction.

With these three deals, HDFC Property would have completed around eight transactions from the current fund, deploying around $310 million.

The company is now looking forward to raise a larger $500-550 million fund, primarily from investors in Asia and the Middle East.

The new fund, unlike the current one, will have an equity and equity-linked component apart from debt, to bolster returns for the fund, said the executive.

While the overall private equity market is engaged in more debt-like transactions, equity deals typically entail a high-risk, high-reward structure for funds.

“Fund-raising sentiment has improved now. While there is a lot of competition to raise domestic capital, with at least 8-10 funds looking to raise money, there aren’t too many people raising offshore capital," said Rajeev Bairathi, executive director (capital transaction group and north India) at property advisory Knight Frank India.

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