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IDFC Alternatives raises $114 mn through third realty fund

03 October, 2016

IDFC Alternatives, the private equity (PE) arm of infrastructure-focused lender IDFC Ltd, has raised Rs 760 crore ($114 million) under its third real estate focused fund—IDFC SCORE Fund.

The Mint reported that IDFC Ltd raised the corpus from domestic investors with a large part of the capital coming from existing limited partners (LPs). 

The development comes within six months after the PE firm hit first close of the fund at Rs 475 crore. At the time of the first close, the company’s statement had said that it is a credit fund focused on the residential sector that aims to provide fully secured but flexible debt to real estate developers. It would predominantly invest in approved residential projects in the top 7 cities across the country.

“Real estate markets continue to be slow and the need for capital remains high. We remain risk-averse and will invest in projects that have approvals and have been launched. As long as the developer is good, we are willing to be flexible and be little patient on repayment,” the Mint report quoted Ritesh Vohra, partner (real estate) at IDFC Alternatives

“This is another milestone for our real estate investments business that has been expanding its footprint steadily. We have been singularly focused on steady deployment and timely exits in all our current funds and plan to execute on the new fund in the same manner,” the report quoted M.K. Sinha, managing partner and CEO, IDFC Alternatives.

Vohra said its focus is on mid-market housing projects, which is a crowded field, with most funds wanting to invest in this space. “Deal flow is slower than what it was two years back but we’ve taken a conscious decision not to do sub-standard deals. We’ll invest about Rs 100 crore in each transaction, and aim to do 2-3 deals this financial year,” he added. 

An email sent to the spokesperson for IDFC Alternatives did not get any response at the time of filing this report. 

IDFC Alternatives had raised IDFC Proprietary Office Fund with a corpus of Rs 700 crore in 2011 and then raised another Rs 750 crore through IDFC Real Estate Yield Fund in 2014.

While the IDFC Real Estate Yield Fund has committed its entire corpus, IDFC Proprietary Office Fund exited from its investments by 2014, generating a 22 per cent internal rate of return (IRR).

IDFC Alternatives has total assets under management (AUM) worth Rs 17,000 crore.

Real estate focused fund raising

The new fund of IDFC joins a host of PE firms which are out to raise capital or have hit milestones for funds focused on the sector. HDFC Capital, the newly created real estate focused PE firm from HDFC Group, has over Rs 5,000 crore corpus for investment in the sector, through equity instruments. 

Essel Finance is out to raise its second fund that has a target corpus of Rs 500 crore including a green shoe option. Motilal Oswal Real Estate, the real estate investment arm of Motilal Oswal PE, is raising its third fund that has a target corpus of Rs 1,000 crore. It hit first close at Rs 500 crore recently and has started the investment process as well. 

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IDFC Alternatives raises $114 mn through third realty fund

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