Mumbai-based property developer Hubtown, earlier known as Ackruti City, is in talks with Indostar Capital Finance, a non-banking finance company promoted by Goldman Sachs, Everstone Capital, and others, to raise Rs 500 crore through a structured finance deal, two persons in knowledge of the deal said.
Indostar is yet to take a call on the deal, said one of the persons involved. Hubtown has plans to invest the money in its upcoming residential projects and refinance its existing loans, the person said. If the deal goes through, it will be one of the largest structured debt deals in real estate space in recent times.
A couple of months ago, Religare promoters Shivinder Singh and Malvinder Singh raised Rs 1,400 crore from UK-based banking major Standard Chartered pledging seven properties in different cities. In 2007, the Mumbai-based Lodha group raised $425 million from German banking major Deutsche Bank.
In a structured debt deal, a borrower has to commit guarantee of debt repayment through a fixed coupon and share upside and returns of equity through preference shares and other instruments.
When contacted, a Hubtown spokesperson said, "The company categorically denies it is in talks with anyone."
Vimal Bhandari, managing director and chief executive officer, Indostar Capital Finance, in an email response, said: “This is to inform you that Indostar has not agreed to do any transaction with Ackruti City,” said.
Hubtown has nearly 13 projects under development in Maharashtra and is looking to launch another six to seven in the next 12-18 months. The company has nearly Rs 1,900 crore and debt-equity ratio of 1.15.
According to sources, the developer is in talks with many private equity funds to raise funds for its projects.
According to property consultants, structured debt deals are gaining ground in real estate sector as most are happening in 18 to 20 per cent.
“Banks were lending money for construction at 13 to 14 per cent rate of interest and PEs are investing at 25 to 30 per cent IRR (internal rate of return). Since banks are becoming very selective and developers are not comfortable with 25 to 30 per cent IRR, the latter are opting for structured deals,” said a head of capital markets team at a international property consultant, requesting anonymity.
“NBFCs are also comfortable as their cost of financing is at 8 to 10 per cent,” the executive for IPC said.