Deutsche Bank has exited its investment into one of the projects of Mumbai-based property firm Lodha Developers for Rs 2,542 crore ($508 million), pocketing returns of 55 per cent or Rs 902 crore ($180 million) for its over four-year-old investment.
This comes as yet another exit in the Indian realty space, which has been abuzz with private equity funds selling their investments made during the heyday of Indian realty in 2007.
In September 2007, Deutsche Bank invested Rs 1,640 crore by subscribing to optionally convertible debentures (OCDs) of Lodha’s subsidiary Cowtown Land Development Ltd. It has now fully exited the investment it had made in the company by selling the stake to the property developer.
The Lodha Group funded the buyback through internal accruals worth Rs 1,720 crore and fresh fundraising of Rs 825 crore.
Abhisheck Lodha, managing director of the Lodha Group, said, “The fresh borrowing of Rs 825 crore is through liquid listed instruments and it is a three-year note. After this repayment, our debt has come down by 1700 crore.”
According to the IPO prospectus filed by Lodha Developers more than two years ago, the group had to repay Deutsche Bank by December 2010. If it failed to pay the interest amount, the bank had the right to convert its investment in Cowtown into equity stake of as much as 99 per cent. Later, Deutsche Bank and Lodhas reached an agreement for repayment of the investment amount. The deal required Lodhas to pay a minimum interest rate of 13.65 per cent which could increase up to 22.50 per cent if market conditions improved.
Cowtown is the company housing Lodha Group’s landmark projects, including Bellisimo in Mahalaxmi, Lodha Aqua in Mira Bhayander Road and land parcel in the central suburbs.
Besides providing an exit to Deutsche Bank, Lodhas will also have to pay off ICICI Venture by the end of this year. Abhisheck Lodha told VCCircle, “ICICI Venture’s investment tenure will be up by the end of 2012 and we will pay them.”
Earlier, Lodhas had also provided exits to JP Morgan and HDFC Venture Fund from their investments in its other projects.
At present, Lodha has other investments from HDFC Venture Fund to the tune of Rs 500 crore in its World One project, the upcoming tallest residential building in the world. It has also received funds from ICICI Venture and Old Lane for its township project.
In 2011, exits worth $457.32 million had taken place in the Indian realty space through 14 transactions, according to VCCEdge, the financial research platform of VCCircle. Out of these 14, eight transactions had been in the form of developers buying back investors’ stake.