Mantri in talks with Morgan Stanley to raise private equity

The realty firm plans to raise private equity for its various projects

Mantri Developers, the Bangalore-based privately-held realty player, has said it had started discussions with global financial powerhouse Morgan Stanley on the possibility of raising private equity for its various projects.

Sushil Mantri, CMD, Mantri Developers, told Business Standard they were in discussions with various private equity investors, including Morgan Stanley, and would look at raising funds as and when a project opportunity comes by. Morgan Stanley had during March 2006 invested $68 million in Mantri Developers at the enterprise level, making this among the first PE investments in the Indian realty sector. Mantri Developers, post that has raised private equity of close to Rs 400 crore from the Xander Group for various projects.

"There is no pressing hurry for us to raise funds as of now. However, we are keeping our options ready, if an interesting opportunity comes by," Mantri added. The company, which focuses heavily on the residential segment, is understood to have a current valuation of a billion dollars. It has so far delivered 10 million square feet of development and has around 8 million square feet under various stages of development.  

He added that despite seven years of Morgan Stanley investing in Mantri Developers, they were not in a pressing hurry to exit. "Morgan Stanley is happy that their investment is appreciating and they may look eventually at an exit as and when we plan a public offer. Morgan Stanley had infused funds into us through an open ended fund, so there is no actual hurry to exit," he added.

Sushil Mantri, who is also vice president, Credai - Karnataka, said the Bangalore real estate market continued to be robust and he did not see any formation of real estate bubble. "The lending institutions are reporting growth, there is no alarming defaults, which are being reported, and the units, which the realtors are developing, are being absorbed mostly by users and not by speculators," he added.

Mantri was reacting to the recent report from credit rating agency Icra’s which said there was  a significant increase in supply of residential space and in the absence of commensurate rise in absorption rates this could result in oversupply situation in Bangalore. Icra  had said there had been a significant increase in residential projects under development in the last two years that could increase supply in the market. It observed that the area launched by major developers in 2012 and the present financial year in Bangalore was three to four times of that sold in 2012. The residential market rebounded in Bangalore in the last two years after witnessing lows in 2009/10.

It, however, said despite the expected oversupply, real estate prices in the city are expected to remain firm and increase 8-10 per cent per annum over the short to medium-term due to a rise in cost of development as well as capital. Estimating Bangalore’s residential market size to be 92 million square feet, valued around Rs 27,600 crore, the report said the real estate sector had grown at a compounded annual growth rate of 6 per cent over the last four years, adding an average of 94,000 new households each year.