Mumbai's luxury township developer Hiranandani Group has raised close to Rs 500 crore through multi-layered transaction for two group companies—Lakepoint Builders and Hiranandani Realtors. The investors include US financial services company Wachovia and Marathon Views (believed to be part of alternative investment firm Marathon Asset Management which has $11 billion under management). Both Lakepoint and Hiranandani Realtors are part of Hiranandani Upscale which is led by one of the co-founders of Hiranandani Group—Surendra Hiranandani.
According to sources in the merchant banking industry, Marathon has picked up a 49% stake in Lakepoint Builders through its Class A voting shares. In addition it has 80% stake in Class B shares of Lakepoint, which is setting up a township in Bangalore with a project cost Rs 1,000 crore. The local promoters hold the remaining 20% stake in Class B shares and 51% in the Class A voting shares. Marathon and Hiranandanis have also subscribed to preference shares in the 80:20 ratio.
The paid up capital of Lakepoint is around Rs 27.9 crore of which around 5 crore is through equity and the rest is through preference shares. Marathon has brought in Rs 22.38 crore for picking the shares.
Besides the equity and preference shares Marathon has also invested another Rs 167.46 crore through compulsorily convertible debentures. The debentures are convertible within the next 10 years. The promoters have also subscribed to some debentures and pumped in close to Rs 26 crore in Lakepoint as their contribution.
Hiranandanis have also brought in foreign investor in another group firm Hiranandani Realtors says this report. Wachovia (which is in the process of being acquired by Wells Fargo—the largest US bank in terms of market cap) is likely to pick an equity stake in Hiranandani Realtors which is developing a mega township in Chennai with a project cost of Rs 3,500 crore. Wachovia has invested Rs 304 crore into the Indian firm. However, in this case Wachovia does not hold any equity stake as of now and the entire equity of the firm is held by the Indian promoters.
Wachovia had in September'08 entered into an agreement with the local partner laying down the timeline for conversion of debentures into equity. The Hiranandanis though have an option to buyback the debentures in which case Wachovia will not own any equity in the company. As the debentures would convert in the future it is not clear immediately how much stake would Wachovia hold post conversion.
All these deals were finalised in 2006 and investments were rolled over the last two years ending this summer. Incidentally, the other group company of the Mumbai-based developers—HIRCO (which is led by Niranjan Hirandani) had raised £380 million from the AIM market n London in the same year. HIRCO was floated as a closed ended investment company to invest in Indian real estate projects and had reported profit after tax of £52.48 million for the six months ending March 2008.