Deutsche Bank exits Lodha investment

Mumbai realtor buys back with internal cash, raises fresh funds of Rs 825 cr

Deutsche Bank has logged a major gain before it exited a four-year-old investment in a Lodha group firm for Rs 2,542 crore, by making a neat profit of 55 per cent or Rs 902 crore ($180 million).

It was in September 2007 that the German bank invested Rs 1,640 crore by subscribing to the compulsorily convertible debentures (CCDs) of Lodha’s subsidiary, Cowtown Land Development Ltd. The bank has now fully exited the investment it had made in the company, by selling the stake to the property developer.

The Lodhas funded the buyback partly through internal accruals worth Rs 1,720 crore and via fresh fundraising of Rs 825 crore, according to Abhisheck Lodha, managing director of the company. After this repayment, the debt has come down by Rs 1,700 crore, from a high of Rs 4,000 crore.

Added Abhinandan Lodha, deputy managing director of the company, “Our ability to generate positive cash flows from our business by focusing on execution and end-user sales has enabled us to make such a large payment.” It has come at a time when the general economic environment is “quite tough”.

LUCRATIVE MOVE

* In Sep 2007, Deutsche invests Rs 1,640 cr by subscribing to the CCDs of Lodha’s subsidiary Cowtown

* The bank makes a Rs 902-cr profit and now fully exits the investment by selling stake to the property developer

* Lodhas fund buyback partly through internal accruals worth Rs 1,720 cr and fresh fundraising of Rs 825 cr

* Its debt is now down by Rs 1,700 cr from Rs 4,000 cr

In September 2007, Deutsche Bank invested Rs 1,640 crore by subscribing to CCDs of the Mumbai-headquartered realtor’s subsidiary Cowtown Land Development Ltd. It has now fully exited the investment it had made in the company by selling the stake back to the property developer.

Cowtown houses Lodha Group’s flagship projects, including upscale Bellisimo in Mahalaxmi, central Mumbai, Lodha Aqua in the Mumbai suburbs and other land parcel in the central suburbs.

According to the IPO prospectus filed by Lodha Developers more than two years ago, the group had to repay DB by December 2010. In the case of a default on the interest amount, the bank had the right to convert its investment into equity stake in Cowtown of as much as 99 per cent.

The relationship between the two was tumultuous until both reached an agreement for repayment of the investment amount. The deal required the Lodhas to pay a minimum interest rate of 13.65 per cent, which could have gone up to 22.50 per cent if market conditions improved.

But other than DB, Lodhas will also have to pay off ICICI Ventures by the end of this year. ICICI Ventures had invested in the Thane project of the group. “The Thane project has to complete in the next 12 months or so. Whenever the project gets over, we will give an exit to ICICI Venture,” Abhisheck Lodha told Business Standard.

In the past, the Lodhas had also bought out JP Morgan and HDFC Venture Fund from their investments in its other projects.

Currently, Lodha has another Rs 500-crore investments from HDFC Venture Fund to fund its World One project SPV, the tallest (upcoming) residential building in the world. It has also received funds from ICICI Venture and Old Lane for its township project.