J P Morgan, Baring in race for stake in Embassy Group SPV

Embassy is looking at Rs 2,400 crore public offer

Bluechip global private equity funds — J P Morgan and Baring Private Equity Partners — are in the race to invest Rs 180 crore in a 14-acre residential project being developed by Bangalore-based developer Embassy Group.

Embassy Group is building the project near the Hebbal flyover, north of Bangalore with 2 million square feet of residential development. Embassy Group is developing the project on a land historically-owned by Kirloskar Group in a 67 : 33 revenue share agreement.

This round of private equity fund raising comes close on the heels of the company detailing its intent to go public in the near future. Embassy Group during the past month filed for a Rs 2,400 crore initial public offer. Edelweiss Capital, Nomura, UBS Securities and Citigroup Global Markets are the book-running lead managers to the issue. According to information with PE funds, Embassy may also look at a pre-IPO placement of up to Rs 1,175 crore. The management of Embassy Group could not be reached for comments.

The company has developed nearly 25 million square feet of residential, office and retail space with a strong presence in Bangalore in addition to some pockets in Southern and Western market. Embassy is also looking to expand its presence in Malaysia and Serbia. Embassy has built some landmark office spaces in Bangalore for a host of clients including Alcatel-Lucent, Atos Origin, ANZ, Cognizant, Computer Science Corporation, Fidelity, Geometric, IBM, LG Soft India, McAfee, Mercedes-Benz, Microsoft, NetApp, Nokia Siemens Networks, Supervalu, Target, Vodafone and Yahoo!

If the private equity investment sails through, it may as well signal a sort of revival of PE appetite in Bangalore’s real estate market. The real estate market in Bangalore, during the peak of 2007, was the darling of the PE players and it blipped off the radar as economic downturn took a strangle-hold of this sector as realtors were faced with unsold inventory leading to bulging debt-pile.

The PE funding into the Bangalore realty market since 2007 has been few and far between with the sole exception of Century Group raising a record $125 million from Goldman Sachs. Post that Adarsh Group is also understood to have raised Rs 125 crore from Kotak Private Equity besides a handful of other small PE deals.

According to Embassy, it intends to undertake a combination of built-to-suit projects and projects done without pre-commitment as they plan their expansion.