Alok Ind to rope in PE for Peninsula

A lok Industries, an integrated textile company that has recently diversified into real estate, is planning to rope in private equity players for its Peninsula project in the Lower Parel suburb of Mumbai by the end of the current financial year.

Alok Industries Chief Financial Officer Sunil Khandelwal said, “We are in advanced talks with two to three private equity firms and by March 2009 the final agreement is expected to be signed.” The PE investments are expected to be around Rs 300 crore. Alok has tied up Rs 300 crore as debt for the project and has sought an additional Rs 500 crore from banks.

The current deal size, which is one of the biggest land deals, has now jumped to Rs 1,200 crore from Rs 1,075 crore upon the increase in the area from 5,75,000 sq ft from H2 last year to 6,41,589 sq ft now. The company’s wholly-owned subsidiary, Alok Infrastructure, had purchased the area from Ashok Piramal group’s Peninsula Land for a sum of Rs 1,075 crore in the second half of 2007.

“This has raised the total consideration payable to Peninsula to Rs 1,200 crore, which will be paid over a period on slab-wise construction till December 2010,” he added.

Along with stamp duty and other charges, the overall payment will be around Rs 1,350 crore. So far, Alok Industries has paid Rs 190 crore to Peninsula. Mid-year, the company’s managing director Dilip Jiwrajka had told Business Standard that the deal with PE firms was in the final stages.

“But, due to financial meltdown, some players withdrew. The firms we are in touch with have asked us to go slow on the project for four to five months,” said Khandelwal.

The company is also developing another project at Nahur, Mumbai, in partnership with the Ashford Group for the development of commercial office space. The total cost of the project, for which Alok purchased 7 acres from Ceat Tyres for Rs 130 crore, will be around Rs 650 crore (including the land value). “We are awaiting approvals for commencing construction,” said Khandelwal. The company will raise Rs 350 crore as debt and the rest would be from the private equity partners.

Alok Industries has received formal approval for its 130-acre textile specific special economic zone at Silvassa (Dadara Nagar Haveli) near Vapi. But now, finding no takers the company has put the project on hold.

“The company bought the land at a low rate, which has now appreciated three times. We have found no takers. Though some textile firms have shown interest in setting up greenfield projects in Silvassa, it will be economically profitable for the company to sell the same to any industry wanting to set up a factory,” Khandelwal said.