Oberoi Realty shelves plans to float mall JV

Mumbai-based Oberoi Realty has put off its plans to float a joint venture with private equity investors for its upcoming malls. It plans to use its internal cashflows and debt to invest in its upcoming malls instead.

The company was in talks with investors, such as US-based Morgan Stanley, Singapore’s GIC and others, to float a joint venture, which was to have a corpus of Rs 1,000 crore. Oberoi Realty was expected to hold about 75 per cent. 

When asked, Vikas Oberoi, chairman and managing director, said the company had enough cash flow to invest in its projects and, hence, did not need to go for external funding.

Oberoi Realty had a debt of Rs 838 crore and cash and bank balance of Rs 352 crore as of March 31, 2017. “They can get debt at seven to eight per cent. Why dilute equity and share rental income,” a source said.

According to sources, Oberoi is planning to build malls in Mumbai’s Worli and Borivali areas. It already has an operational mall at Goregaon. “The company has plans to build a luxury mall in Worli as part of its mixed-use project. There will be another mall on the land bought from Tata Steel,” the sources said.

While Morgan Stanley has exited most of its Indian real estate investments, it has a stake in Oberoi Realty. Morgan Stanley bought about 10 per cent stake (worth Rs 675 crore) in Oberoi Realty in 2007.

While Morgan Stanley was planning to raise a India-focused real estate fund, not much information was available on the same. 

GIC has invested over $1 billion (Rs 6,600 crore) in the Indian real estate over the past two years. Last year, it bought a 50 per cent stake in Viviana Mall at Thane for about Rs 350 crore. It also holds a stake in the Runwal group’s RCity mall at Ghatkopar. It entered into an agreement with DLF to buy 40 per cent of promoter stake in its rental arm DLF CyberCity Developers, which owns offices and malls.

US-based Blackstone is emerging as the biggest owner of malls with a portfolio of 4.7 million sq ft. 

It has acquired seven malls in the past two years and is looking to buy malls in Pune, Delhi and Hyderabad, and even enter cities such as Jamshedpur.