Temasek to invest $51M in Oberoi Realty

The country's second largest realtor by market capitalisation Oberoi Realty has inked a deal to raise Rs 324.5 crore ($51 million) from Singapore government owned investment firm Temasek in a rare deal where a property developer is raising private funding for its holding company.

Private equity deals in the real estate sector typically involves investments in specific projects.

Though there have been a few deals where the holding company has attracted private equity funding, most of these were struck during 2005-08, the go-go years of the previous bull run in the Indian stock market.

Indeed Oberoi Realty itself attracted funding from Morgan Stanley Real Estate, the real estate focused asset management arm of financial services giant Morgan Stanley. It had invested in in Oberoi Realty in 2007, three years ahead of its IPO.

After the slowdown hit Indian economy and particularly sank the fortunes of real estate developers almost all the private equity deals in the sector was through project level investments. In fact most of the realty PE deals are made through debt securities with fixed rate of return.

Oberoi Realty has proposed to make a preferential allotment of 11 million shares to Temasek at Rs 295 each it said on Friday. Temasek will get around 3.2 per cent stake in the Mumbai-based realtor through the private placement.

Existing investor Morgan Stanley Real Estate also holds 3.2 per cent stake after it sold some shares over the last year. It had invested Rs 675 crore in the realtor eight years ago through a combination of fresh issue of shares worth Rs 596.7 crore and non-convertible preference shares worth Rs 78.3 crore picking 10.76 per cent stake. Its holding diluted marginally after Oberoi Realty’s IPO in 2010, one of the last significant real estate developers to go public in the country.

Early this month, Oberoi Realty had received its board approval to raise as much as Rs 2,250 crore ($353.4 million) through issue of debentures and equity shares. The board of directors at its meeting held on June 2, 2015, passed the resolution to raise up to Rs 1,500 crore ($235.6 million) and Rs 750 crore ($117.8 million) through non-convertible debentures and equity shares or any other securities, respectively.

For Temasek, one of the most active investment firms in the country, this is the second known bet in the real estate sector and comes five years after it last invested in the sector. It had previously invested in Bangalore-based realtor Sobha Ltd through a secondary market transaction. However, one of its international portfolio firm Mapletree also had bought an IT park in Bangalore in 2011, according to VCCEdge, the data research platform of VCCircle.

Temasek had exited Sobha a little over a year ago.

Internationally it also counts CapitaLand as a portfolio company in the real estate space. CapitaLand in turn has an exposure to the Indian market.

This also happens to be the sixth new investment for Temasek in India since January, making it the most active year. Temasek has been typically investing in around half a dozen firms in India in the whole calendar year.

Since January it has bought Silicon Valley Bank's Indian venture debt arm and renamed it InnoVen Capital besides investing in Sun Pharma, Glenmark Pharma, Medanta and partnering private equity firm Advent to buy Avantha Group's stake in Crompton Greaves' consumer products business.

GIC, a sister entity of Temasek and officially the sovereign wealth fund of Singapore, has been more aggressive in real estate as a sector, especially in India. It has been sealing deals across residential and commercial segments of late.

Most recently, it raised its holding in Mumbai IT park firm Nirlon Ltd to 63.92 per cent for Rs 568 crore.

In the commercial space, it bought a special economic zone (SEZ) property from Hindustan Unilever Ltd under a joint venture with Brigade Group. It separately has a joint investment platform (Rs 1,500 crore) with Brigade Group for residential developments in the southern part of India.

GIC has also sealed two joint ventures with North-based Vatika Group for township projects in the residential segment.

As reported by VCCircle, GIC is also in talks with Shriram Properties to acquire its IT SEZ The Gateway for Rs 850 crore and is the front-runner to buy majority stake in Exora Business Park, a joint venture between realty PE firm Red Fort Capital and Bangalore-based Prestige Estates Projects Ltd.

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