Shriram Properties seeks $100 mn from PEs

Shriram Properties, the real estate arm of Shriram Group, plans to raise $100 million (Rs 452 crore) this year from private equity (PE) investors as it seeks to deepen its penetration in Southern India, senior company officials told Business Standard. The company, which was planning an initial public offering (IPO) in 2010, has deferred its plans for a share sale for at least the next 12 months, said Chairman Arun Duggal.

The developer is raising this money as part of its plans to invest around Rs 3,000 crore in various residential and commercial projects over the next three years. Shriram Properties currently has 9 million square feet under construction and presence in Bangalore, Chennai, Vishakhapatnam, Kolkata and Coimbatore. “We will deploy the money in new projects,” said Managing Director M Murali. “We want to expand our presence in Southern India.”

The company is currently working on two integrated townships in Kolkata and Vizag and has completed an IT Special Economic Zone (SEZ) in Chennai named ShriramThe Gateway.

The company already has PE investments by Starwood Capital, Sun Apollo and Walton Capital. According to sources, the company is in talks with US-based Texas Pacific Group (TPG). TPG recently inked a deal with Shriram Capital, the financial services holding company of the Shriram group, to pick up a 20 per cent stake worth Rs 1,000 crore. If TPG invests in Shriram Properties, it would be one of the few foreign funds putting money into the Indian real estate sector.

While domestic funds have put in $864 million (Rs 3,950 crore) in 22 realty deals since January this year, foreign funds have invested a mere $126 million (Rs 575 crore) in only three deals, according to data collated by Venture Intelligence that tracks PE and merger and acquisitions in India. During the property boom of 2004-2008, foreign funds put in millions of dollars in realty projects, expecting huge returns. Their investments peaked in 2007, when they put in around $5.73 billion (Rs 26,100 crore) as against $ 4.05 billion (Rs 18,500 crore) put in by their domestic counterparts.

But the global economic slowdown of 2008-09, which led to lower home sales and redemption pressures on PEs, spoilt the party. Indicating poor risk appetite, foreign funds invested $183 million (Rs 835 crore) in Indian real estate in 2009, while domestic funds put in $665 million.