PE majors' plan to buy majority stake in Vrindavan Tech Village stalled

The move by global private equity majors to buyout the promoters of Vridavan Tech Village in Bangalore with an investment of around Rs 2,000 crore has been stalled just before the closure stage. The proposed buyout was considered as one of the largest private equity deals in the Indian real estate sector.

It is learnt from the sources that, the commercial property owned by promoters of Vikas Telecom were in negotiations with a group of global PE majors including Blackstone among others to offload majority stake in a special economic zone spread over 100 acres. The promoters have already developed 2 million square feet spread across over 20 acres, while the rest was to be developed by the acquirers. "The deal has been stalled as the promoters are looking at various options and a consensus on the sale could not be reached," two senior investment bankers who are in the know about this transaction told Business Standard. None of the involved players could be reached for comments.

Global private equity majors including Blackstone and MapleTree have been aggressively looking at acquiring rental yielding commercial properties in India. In addition to coming close to clinching the deal with Vrindavan Tech Park, Blackstone was also close to buying significant stake in UB City, a commercial property owned by UB Group and Prestige Estates.

It is understood that Blackstone has already committed close to $600 million in India's real estate market and is eagerly looking for more such transactions. The global PE fund has been working closely with Bangalore-based realtor Embassy Group to channel funds into commercial properties. Prior to looking at these two transactions, the Blackstone-Embassy combine had acquired majority stake in Manyata Tech Park in a $200 million transaction.

Sanjay Dutt, Executive Managing Director, South Asia, Cushman & Wakefield speaking on the trend in such transactions noted, "Investment in ready income generating / operational office assets have gained strength over the last few years due to lower risk and steady cash flows associated with this type of investment. With increase in number of high value transactions in this sector, the market is moving towards a mature phase."

According to Cushman & Wakefield, Bangalore witnessed the highest number and value of private equity investments at Rs 3200 crore in 2012, recording more than double of investment over last year, followed by Mumbai and NCR. "Bangalore witnessed some high value investments in pre-leased office asset which has led it to be the top runner in the PERE market. However NCR and Mumbai continue to be preferred locations for investments due to the opportunity," he added.

NCR market in 2012 saw lower number of investments, as it is an active residential sales market, which obviated the need for PE funding in many projects."