Essel to raise Rs 1,700 cr via 2 realty-focused funds
Essel Financial Advisors and Managers (EFAM), the private equity arm of Essel Finance, is making two real estate-focused funds – a domestic fund of Rs 500 crore and a foreign fund of $200 million (Rs 1,200 crore).The focus of both the funds will be on investing in residential projects in top six cities in the country.
For realty players, PE funds are a favoured source of finance as the latter are facing severe cash crunch with most banks staying away for the fear of delinquencies.
PE players look for a 20-25% returns, on an average and they are offered abundant opportunities for them by the real estate sector. EFAM has already made investments of Rs 180 crore spread across three deals – two in National Capital Region (NCR) and one in Mumbai as told to dna by Abhinav Bhushan, head of private equity. Bhushan added we are very close to signing a couple of more deals and the deal size for domestic fund are typically around Rs 50-100 crore.
We believe in investing both in special purpose vehicles (SPVs) as well as at entity level, but our preference is SPVs because it offers better control and security. When the projects are at an advanced stage of development, there is no aversion to entity-level funding. The latest investment includes in NCR, an Rs 45 crore deal with Assotech Ltd whereas it has successfully exited from Ariisto Realtors in Mumbai. Two sets of developers are being mainly targeted by the Private equity players. Amongst those, one developer wants to exit already-existing PE investors towards the end of their term and restore their equity investment with less expensive options. The other set of developers are looking for superior opportunity for growth and acquiring new projects at amazing discounts.
In Gurgaon and Mumbai, EFAM invested in projects by buying out an existing PE investor as the project was close to completion.
Bhushan alleged, that a serious effort is been taken by EFAM to set a benchmark for transparency in credit process. He added, in India, EFAM is the only real estate investment manager to be rated. India Ratings (Fitch Group) recently rated EFAM as “IND Good Standard”.
Bhushan further added, in top six cities, the fund has a focused approach of investing in approved residential projects through secured debt structures. The targeted return from the fund is expected upwards of 20%.He said, A good opportunity is seen on accounts of banks not lending forcefully to the real estate sector and slowdown in the housing market coupled with uncertain political environment owing to impending general elections.
Source: DNA India
Abhinav Bhushan, Domestic fund, Elections, Essel Financial Advisors and Managers, Foreign fund, Gurgaon, Mumbai, National Capital Region, PE funds
