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IL&FS PE takes haircut in partial exit from DB Realty

28 July, 2017

IL&FS Investment Managers Ltd, the private equity arm of Infrastructure Leasing & Financial Services Ltd, has partially exited its 10-year-old investment in Mumbai-listed developer DB Realty Ltd with a haircut.

The firm, one of the country’s largest homegrown private equity firms by assets under management, had put in around Rs 93 crore for a stake of around 4.6% in DB Realty in 2007. It sold a third of its stake this week for Rs 15 crore, clocking a haircut of 59%.

The PE firm’s remaining 2.9% stake is valued at Rs 22 crore.

Separate emails written to the spokespersons for DB Realty and IL&FS PE did not elicit any response till the time of filing this report.

IL&FS had invested in DB Realty just before the global financial crisis of 2008-2009 hit home, hurting the real estate sector and making it tough for investors to clock high returns. The situation was worse in the case of DB Realty as it got embroiled in a scam related to licences for second-generation, or 2G, telecom services soon after it went public in 2010.

Also, a lot of deals were struck at the entity level in the hey-days of 2006-2008. Thereafter, investors started investing mostly debt capital through project-level financing as they turned risk-averse.

DB Realty never fully recovered from the twin blows of the financial crisis and the telecom scandal. According to a recent report in financial news portal moneycontrol.com, DB Realty is looking to exit or sell a stake in two projects in Mumbai.

The developer, which has projects across residential and commercial segments, recorded a paltry revenue from operations of Rs 13.78 crore in the financial year through March 2017, a massive drop from the Rs 156.73 crore in the previous year, stock-exchange data showed. Its net profit increased to Rs 1.43 crore from Rs 0.08 crore.

IL&FS PE, which has made several investments from its real estate funds, recently put its IL&FS India Realty Fund I on the block. The fund has elicited interest from multiple investors, including Blackstone Group.

IL&FS India Realty Fund I, which was closed in 2006, has made 17 investments and has clocked six exits so far. The fund’s portfolio has income-producing assets, redevelopment opportunities and ground-up development projects across regions.

The PE firm’s other funds are Leverage India Fund, Pan Asia Project Development Fund, IL&FS India Realty Fund II, Tara India Fund III and SCI Asia. Some of these funds, including India Realty Fund II of 2007 vintage, are under the exit mode.

However, like other PE firms in general, IL&FS seems to be facing difficulties in clocking exits. It has so far been able to divest only 12 assets from its portfolio of 45 companies across the two funds.

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IL&FS PE takes haircut in partial exit from DB Realty

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