Reliance AIF Asset Management Co. Ltd, which is a part of Reliance Capital Asset Management Ltd (RCAM), is aiming to more than double its real estate alternate investment fund (AIF) assets as it is gearing up to hit the road to raise Rs 1,000 crore ($150 million) in its second outing, a top company executive told VCCircle.
Christened as Reliance Yield Maximiser AIF Scheme II, the fund will target to raise Rs 500 crore with a green shoe option of Rs 500 crore. The firm claims to have got soft commitment from existing domestic investor base for the new fund, which is slated to be launched in a few days.
“Reliance Yield Maximiser AIF Scheme II is a closed ended scheme (54 months), which seeks to invest in a portfolio primarily comprising of relatively high yielding securities (convertible or non-convertible debentures) and other instruments (including but not limited to mezzanine instruments) issued by Indian companies / entities participating directly or indirectly in the real estate sector,” said Sundeep Sikka, CEO, RCAM.
The new fund is a successor to Reliance Yield Maximiser Alternative Investment Fund Scheme I – which was launched last year and hit final close recently. Under Scheme I, it was aiming to scoop up the same upper target corpus of Rs 1,000 crore including a green shoe option of Rs 500 crore. It eventually closed it at Rs 720 crore.
Sikka said the first fund has successfully committed all the corpus.
The fund has so far sealed nine transactions (including an upcoming one) through non convertible debentures (NCDs) with a negotiated internal rate of return (IRR) of 20-24 per cent. It aims to finish depoying the money from the fund by December.
The new fund will broadly replicate the investment strategy of its maiden fund. It will chase investment in residential properties across top metro cities and deploy capital through NCDs. The deals will be structured to provide returns primarily by way of coupon, premium on redemption of debentures and capital gains on securities. It will specifically look at projects that have relatively shorter gestation periods, typically between 3 to 4.5 years and has no land aggregation or acquisition risk.
While launching the maiden fund last year, RCAM had said that it aims to raise Rs 5,000 crore through different funds under AIF route in the coming three years. With the new fund, it will take its AIF assets to roughly Rs 1,700 crore and is putting together plans to launch more funds.
Even though it has launched back to back domestic funds, it has not ruled out the possibility of going offshore in the next outing. The firm said that it is not looking at offshore market as of now but the work on that front is in progress.
The fund launch comes at a time when the realty market is going through a tough time. Sales across markets have slowed down taking unsold stock many notches higher. However that has not stopped firms from raising and deploying capital. Some of the PE houses out to raise capital from domestic investors include Motilal Oswal Real Estate (Rs 1,000 crore in the third fund); ASK Investment Advisors (Rs 1,500 crore in third domestic fund) among others.
RCAM claims to have undertaken 36 different transactions, with 26 unique developers and committed disbursement of approximately Rs 2,000 crore over the last three and half years through its portfolio management services or PMS unit. It also boasts of having exited from 21 transactions and have paid back approximately Rs 1,100 crore to Limited Partners.