JP Morgan, Apollo exit BPTP with $105M after long-drawn arbitration

Gurgaon-based developer BPTP Ltd has agreed to buy back the stake held by JP Morgan and Apollo Global in the company for Rs 693 crore ($105 million) following a long-drawn arbitration battle.

BPTP said in a statement its promoters will shell out Rs 333 crore and Rs 360 crore to purchase the stakes of Apollo Global and JP Morgan, respectively. The payment will be made over a period of time.

In 2007, CPI India I Ltd, a Citigroup fund now managed by Apollo Management, invested Rs 322 crore to pick up a 5.67 per cent stake in the company. Next year, Harbour Victoria Investment Holdings Ltd, a subsidiary of JP Morgan Chase group of companies, got a 2.15 per cent stake in the company by investing Rs 215 crore. JP Morgan purchased additional shares worth Rs 26 crore from the company's promoters to take its stake to 6.21 per cent in 2009.

The terms of the investments mandated an exit through an initial public offering (IPO). The developer filed its draft red herring prospectus in December 2009 and secured the approval from the Securities and Exchanges Board of India in May 2010.

However, the company could not launch a public offering, like many other developers during that time, due to poor market conditions following the global economic crisis. The investors dragged the developer into an arbitration due to the delay in the exit.

All the firms involved have now reached a settlement, BPTP said.

Apollo Global barely manages to get a return in local currency terms while it is estimated to be exiting with a haircut in dollar terms.

JP Morgan gets reasonable returns in rupee terms over a fairly long holding period, thanks to its follow-on deal with the promoters in 2009. However, it almost exits at par on its dollar investment, given the sharp slide in the value of the Indian currency over time, as per VCCircle estimates.

The firm didn’t say if the two PE investors' stake got diluted over time with fresh equity funding. Based on their stake held as of 2009 and the exit value now, BPTP is valued at Rs 5,775 crore ($875 million).

Asset sales

To fund the exits, BPTP has sold its IT park that houses its head office in Gurgaon -- known as BPTP Crest -- to Bangalore-based real estate company RMZ Corp at an enterprise value of about Rs 850 crore. RMZ has bought the asset through its collaboration with Qatar Investment Authority (QIA).

This will also mark RMZ’s entry in the real estate market of North India. The joint investment platform of RMZ and QIA is also separately buying Equinox Business Park in Mumbai from Essar Group to mark its presence in the country’s financial capital.

The asset sale in Gurgaon will allow BPTP to give a complete exit to Blackstone, which had invested in the IT park in 2007. BPTP neither shared details of Blackstone's investment nor the money that the PE firm would get in the exit. But it added that it will raise more cash through a separate strategic asset sale over the course of next year.

The company has put a slew of assets, mostly land parcels, on the block across different micro markets of Delhi NCR, the country's top realty market by volume.

A spokesperson for BPTP said that after giving exit to the three investors the company is now focused on completing its projects by raising construction loans from banks and financial institutions. “We also plan to sell some non-core assets to raise funds for meeting our business requirements,” the spokesperson said.

A lot of money flowed into India’s real estate market in 2007-08 especially at the entity level with investors hoping to exit through IPOs. But the way the real estate story has unfolded, many a time investors had to sue their developer partners to exit.

Recently, real estate firm Logix Group and London-based investment fund Alpha Real Trust were directed by the Delhi High Court to jointly auction disputed property Galaxia, an information technology special economic zone project in Noida.

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