Shriram Properties goes after more private equity

To raise another Rs 300 cr to fund land buys talks in final stage

Shriram Properties, real estate arm of the Rs 50,000-crore Shriram Group, has planned to raise around Rs 300 crore from private equity (PE) entities.

It had recently raised Rs 100 crore from ASK Property Investment Advisors. The PE-backed company has said it was talking to more new PE funds, to raise money for specific projects.

In September, the company acquired prime land parcels in Bangalore and Hyderabad from the Citi group for Rs 101 crore. This was funded through the money raised from ASK Property, which is to now become a co-developer in the two residential projects at Bangalore and Hyderabad, targeting the upper-middle income group.
 

PE DEALS IN SHRIRAM PROPERTIES
Date	Investor	Amount ($ mn)
Sep ’08	Samsara Capital*	12.0
Jan ’12	Paracor Capital Real Estate*	6.0
Jan ’07	SUN-Apollo Ventures	50.0
Sep ’07	Starwood Capital, Walton Street Capital	100.0
Dec ’07	Hypo Real Estate Group	96.0
Feb ’10	ICICI Venture, ICICI Prudential PMS	15.0
Jun ’11	TPG Capital	100.0
Sep ’12	ASK Group	18.5
*Raised by Shriram Land Development, rest by Shriram Properties Source: Venture Intelligence

M Murali, managing director, Shriram Properties, said it was planning to acquire land parcels worth around Rs 600 crore in and around this city. “We (the company) will bring around Rs 200-300 crore and the balance will be raised from PE investors. Negotiations are in the final stage,” he said.

The company is backed by TPG, Walson Street, Sun Apollo, Starwood, ICICI and some other funds. Apart from talking to new funds, it is to dilute stake in individual projects. At present, 40 per cent of the stake is with PE investors, which have put in $200 million at various stages since 2007.

In future, Shriram would like to raise money at the project level, says Murali.

It plans to build around 70 million sq ft in the next five to seven years, which includes 4.2 million sq ft of commercial space; the rest would be residential. These projects would cost Rs 25,000 crore.

Murali says the company is debt-free and raising debt is an option. Their current land bank is 1,000 acres.

The plans come at a time when PE investments in the real estate sector fell 15 per cent during the first three quarters of 2012. The sector attracted Rs 3,500 crore, around 15 per cent less than the same period last year, said realty consultant Cushman & Wakefield in a recent report. The first three quarters of 2012 also saw fewer deals than last year.

The three major metropolitan areas of Mumbai, Bangalore and the National Capital Region have got a majority of the investments by PE funds in the realty sector over the years. However, their share reduced from 84 per cent in the first three quarters of 2011 to 78 per cent in the same period this year. Pune, Chennai and Hyderabad have also witnessed steady interest from PE investors.