Century Real Estate Holdings Pvt Ltd, a Bangalore-based firm with possibly the largest land bank among the southern Indian developers, is in talks with private equity and hedge funds for raising up to $200 million at the holding entity to pursue development plans aggressively.
The fundraise will be through a combination of debt and equity, and will be employed for the company’s plans to develop 3-4 integrated townships near Bangalore. “These projects will be executed on large land parcels of anywhere between 100 and 300 acres within 30 km radius of the city,” P Ravindra Pai, Managing Director, Century Real Estate, told VCCircle. He, however, declined to divulge the identity of the potential investors.
The company with a land bank of over 3,000 acres – estimated at over $2 billion – was founded by real estate entrepreneur Dayanand Pai, who emerged as the the biggest land aggregator in south India over the last three decades.
Five years ago, Century decided to become an independent developer after having partnered with many other real estate firms for jointly developing its land over the years. “We have delivered over 800 residential units since then, but we are now focused on emerging as ‘urban master planner’ developing large townships,” Pai added.
Morgan Stanley, Forum Partners, Baring and Appollo are among the funds that are holding parleys for potential investments. Ernst & Young are lead advisors to the company, while boutique investment bank 130R Capital is jointly working on it with few investors.
The company would raise $120 million to $200 million from more than one investor with whom discussions are at fairly advanced stage. Morgan Stanley and Baring India declined to comment on speculation, while Apollo could not be reached for immediate comments.
“For the equity part of the deal, we would be looking at convertible structures with capital cost of 15-18%. In the case of debt, we are looking at 15% for the investors. This is slightly more than the project financing cost after factoring in the end-use flexibility, as we are raising funds at pre-development stage,” Pai said.
“The proposed integrated townships will be mixed use ones with commercial, corporate and residential developments. We will be bringing in strategic partners for taking this forward taking it from acreage to square footage in terms of development,” he added.
Currently, Century is developing nine residential projects spread across 1.2 million sqft, and another 1.7 million sqft of new projects are on the anvil taking its apartment inventory to 2700 units. It has handed over 800 residentials units totaling just under one million sqft till date.
Last month, VCCircle reported that Kotak Mahindra Bank was subscribing to Rs 200-crore non-convertible debentures (NCDs) issued by Century for its working capital requirements. The three year-old bonds have 16.5% yield and is backed by Century’s 4-5 upcoming residential projects.
Several Indian developers raised large round of funding from PE players based on land bank and future demand during 2007-08. But investors are now looking at yield based assets as some of their past deals failed to yield adequate returns and capital markets turned choppy for the real estate sector. Also, some players are looking at instruments like non-convertible debentures. Besides, investment focus has also shifted to residential projects in the mid-price segment where demand has made a smart comeback.