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An apparent slowdown in the real estate sector is forcing PE (private equity) funds to rein in their exposure to the sector, with nearly 30 per cent of the deals now stuck over valuations. PE funds and analysts have become far more cautious in evaluating real estate investments in India. One of the analysts said that some of the funds are tightening norms for valuations after the slowdown and at least 30 per cent of the deals are taking a much longer time to go through because of valuation issues. Mr Ritesh Vora, who is a director (investments) for PE fund Saffron Asset Advisers told Business Line that as the residential projects are in a correction mode, PE funds are becoming more selective. “The evaluations are more rigorous than they were a year ago. We are being more selective than before,” Mr Vohra said. But the situation was not so tough for real estate companies earlier. With the stock market on a downslide, real estate companies deferred their IPO plans and turned to PE funds to raise money. According to ICICI Securities, during the last two years, around 60 funds raised $30 billion in assets to invest in Indian real estate. […]
India’s real estate party may be cooling down rapidly. Global private equity firms say that they would rather invest in the US realty market than in the Indian one because US property prices have fallen so sharply that yields on investments there will be more attractive—without the hassle. Private equity firms made a beeline for India after the government allowed foreign direct investment in real estate in 2005. They were attracted by returns of 25-30%, but with home prices falling in the US, global private equity firms now believe it makes more sense to park their investments in that country. “Last year, Japan was a more attractive market to put money in. If you look at the US, we can now get an internal rate of return of 25% there, so why would anyone want to come to India?” asked a senior executive at an international financial services group, who did not wish to be named. Four out of six private equity funds Mint spoke to said they are no longer investing in India. They didn’t want to be identified. The US, reeling from a subprime lending crisis, is seeing the worst housing slump since the 1930s. The median price for a single-family home has dropped 7.7% in the first quarter of the year, the biggest decline in at least 29 years, as values tumbled in two out of every three US cities, according to the National Association of Realtors. Sales of single-family houses and condominiums also fell 22% to 4.95 million at an annualized pace, the slowest in a decade. […]
ICICI VENTURE Fund Management Pvt Ltd, the private equity arm of India’s second largest bank, ICICI Bank, will raise as much as three billion dollars for an infrastructure and a real estate fund, reports Bloomberg. ICICI Venture will start the roadshows next week for a $1.5 billion fund, and may also look at raising a real estate fund of equal amount, ICICI Venture CEO Renuka Ramnath has been quoted as saying by Bloomberg. The proposed real estate fund will invest in residential and commercial projects in a dozen cities including New Delhi and Mumbai. Most of the funds will be raised from investors in the US, Europe, Japan, Canada and the Middle East. In September last year, Ramnath told Mint newspaper that it would raise $7.5 billion over three years for a variety of funds like real estate, hedge and mezzanine funds, besides a general PE fund. By the end of 2010, the firm plans to have over $10 billion capital under management. […]
Emirates Telecommunications Corp may compete with Mexican billionaire Carlos Slim and Russia's Altimo for a $1 billion stake in India's Tata Teleservices Ltd., al-Khaleej newspaper reported. Etisalat is likely to make the best offer, the United Arab Emirates newspaper reported, without saying how it got the information. “We have already mentioned we are evaluating several opportunities in India,” Etisalat Chairman Mohammed Omran told Reuters. “We haven't decided to select one at this stage. It is still too early,” he said, declining to comment directly on the newspaper report. A Tata Teleservices spokesman declined to comment on the specifics of the story, saying “we continue to evaluate all options.” State-owned Etisalat said last month it was looking to invest as much as $4 billion in India, either buying into a telecom provider or a licence. […]
Amidst speculations of diluting stake to Mahindra and Mahindra, Kinetic Motors on Wednesday said it was looking to mop up Rs 100-125 crore in the next three months for expansion. “We plan to raise anything between Rs 100-125 crore within the next three months,” Kinetic Motors' Managing Director Sulajja Firodia Motwani told reporters, declining to comment on reports of possible stake sale to M&M. The fund would be deployed for capacity expansion as well as for introducing new products. “We are yet to decide the means of raising funds,” she said. (ET) […]
The top managements of Bharti Airtel and South African telco MTN Group and the Lebanon-based Mikati family (which holds 9.8 per cent) are looking at a 50-50 cash-and-stock deal option as part of possible merger talks against an earlier 60:40 structure. Banking sources said with the MTN shareholders asking for a higher price than what Bharti had initially offered, the Indian telecom company might now pay 50 per cent of the money in cash and the rest through shares in Bharti Airtel. The sources added that MTN is also believed not to favour signing an “exclusivity” contract with Bharti Airtel under which it would be bound not to talk to any other competing bidder till the negotiations with them have been concluded. […]
Bangalore-based John Distilleries, a group company of Paul John Enterprise, is eyeing to raise Rs 150 crore through the private equity route to fuel its capacity expansion. The company is in discussions with a UK-based private equity fund for this infusion by diluting not more than 25%. Interestingly, this is the PE fund which initially funded Foster's beer during its growth stages. John Distilleries Limited, an Indian distilling firm with capital of Rs 800 crore, is the 4th largest liquor company in the country in terms of volume. The company promotes its products across India and has an annual turnover of over Rs 600 crore. The company manages to sell over 7.5 million cases per annum. The company also plans to increase its capacity to 9 million cases a year from the current 7.5 million cases per annum. John Distilleries currently derives majority of its sales from Karnataka, Andhra Pradesh, Kerala and Maharashtra and is expanding its presence to Chattisghar, Rajasthan, Chandigarh, Haryana and Punjab. (Top News) […]
The lull in initial public offerings (IPOs) presents opportunities galore for private equity funds, which seem to have become the first port of call for companies in urgent need of capital. Ironically, this very lull has also become a bane of sorts for some funds, which are already invested. Some private equity funds that had invested into companies in the past, and may have planned an exit now, have had to defer their plans as investor appetite is at its nadir. Notably, exits for a private equity investor are primarily through IPOs, rather than mergers, acquisitions or strategic sales. “There are companies in our portfolio, which may have been ripe for IPOs had the market sentiment been positive,” says K Srinivas, managing partner at BTS Investment Advisors, which has been investing in Indian small and medium enterprises since 1997. […]
The problem is emanating from the reckless lending in the USA over decades, and especially in the residential mortgage market over the past 6-7 years that has brought severe strain to the global credit markets. Real estate prices in the US had risen significantly in the last 15 years backed by some very lenient lending practices. This was all possible because such loans along with other types of debts were pooled and packaged into special vehicles (CDOs-Collateralised Debt Obligations) and sold globally to investors who were looking for higher yields against the backdrop of falling interest income from more traditional investment options such as debt issued by the US treasuries. The repercussions of the US sub-prime crisis and the slowdown are sure to show up in the rest of the developing world. India is not likely to be any different. We have already seen some amount of rationalisation of real estate prices, particularly in the residential sector. Along with high overall growth, the size of high and middle-income group population has exploded in India and their affordability levels have improved tremendously. The nationwide shortage in housing units is placed at a massive 20-25 million units. And the explosion in the IT/ITES sector will remain for a while. […]
L&T has received several bid offers from Indian and overseas companies for its ready-mix concrete (RMC) business. The successful bidder would be announced shortly, according to sources. Among the foreign companies are Holcim and Lafarge. Holcim already has Gujarat Ambuja Cement and ACC. Its RMC business is handled through ACC Concrete Ltd which is a 100 per cent subsidiary of ACC. ACC Concrete, has less than half the number of RMC units than L&T and the L&T acquisition could well catapult Holcim to the number one position in the ready-mix business in the country. Lafarge would like a stake in L&T’s RMC business as it will give the company a footprint in the western and other parts of the country. L&T’s RMC business is worth over Rs 1,000 crore. The Aditya Birla group is also said to be interested in L&T’s business but this could not be confirmed. […]
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