At a time when corporates and private equity firms are either renegotiating on agreed prices for warrant conversion or backing out of such transactions, domestic real estate fund Kotak Realty has converted warrants in Sunteck Realty at the agreed price. With the conversion, Kotak Realty now controls 10% in the real estate firm.
“We are bullish on Indian real estate. The fundamentals of many realty companies are still strong. We have converted the warrants at the agreed price,” Kotak Reality Fund CEO S Srinivasan told ET. Kotak Reality converted the warrants at Rs 1,167 per share. On Thursday, Sunteck Realty shares ended down 2.8% at Rs 1,547 on BSE.
Warrants are quasi-equity instruments that give the holder the right to convert them into equity at an agreed price within a specified timeframe.
In October 2007, Kotak Realty had agreed to pick up 10% stake in Mumbai-based developer Sunteck for Rs 140 crore. Kotak had said that the investment was through a combination of equity and convertible preference shares, which on conversion would result in a 10% in the company on a fully-diluted basis.
Kotak Realty has routed the investment in Sunteck through investment fund Kotak Alternate Opportunities India Fund. The investment was one of the first investments of Kotak Realty in the listed realty firms.
Analysts say falling share prices are forcing many corporates, promoters and equity funds to review their investment strategies. The share prices of many companies are currently trading below the conversion price. “Investors are even ready to forfeit the 10% of the total warrant amount paid by them at the time of allotment. Many are backing out from the deal or renegotiating prices,” said an industry analyst.
Sunteck Realty is developing residential and commercial projects in Mumbai, Goa, Pune, Nagpur, Chennai and Oman. Currently, the firm has 25 million sq ft under development.
Source: Economic Times