DivyaSree Developers, a Bangalore-based realty developer is looking to unlock value in 2.5 million square feet of its rental-yielding commercial development, spread majorly across Bangalore and Hyderabad. The developers who is one of the strong players in the commercial development in South Indian market, has a topline of Rs 1,000 crore and a debt of Rs 950 crore.
The company has total commercial development of 5 million square feet and is on course to add another 3 million square feet. Talking to Businessd Standard Bhaskar Raju, Executive Director, DivyaSree Developers said that he would not mind exiting 2.5 million square feet for Rs 1,100 crore and may even look at additional 1 million square feet if the price is good.
“There are some offers which we got, but the price is not to the mark which we are looking at. As and when we get a good valuation, we will exit,” Raju added. DivyaSree Developers will be looking to pare down its debt from the proceeds and also use the funds for further development.
If DivyaSree Developers finds a suitable buyer for the assets, this will be the third major such transaction in the Bangalore real estate market.
During the mid of last year, global private equity major Blackstone picked up 37 per cent stake in a commercial development owned by Embassy Group. Prestige Constructions, another Bangalore-based real estate developer, is understood to be examining proposals to exit 4.5 million square feet of IT SEZ in Bangalore for as much as Rs 1,800 crore.
After establishing in the commercial real estate development, DivyaSree is strengthening its residential portfolio and is putting up an expansive 137 acres integrated township in Chennai, in which there will be 6 million square feet of development taking the total residential area to 7.7 million square feet. Investment bankers further indicate that DivyaSree Developers is also close to raising $30 million through a private equity deal for various of its ongoing projects and will be part of a $100 million fund raise over the next four years.
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According to sources the company is also gearing for an eventual exit of TPG-Axon, a global private equity fund which had invested $100 million during 2007 at the enterprise level.
“We have a good relationship with TPG-Axon and they have helped us scale during the past four years. There has been no direct talk about TPG-Axon exiting their investment with us. However, as a PE fund, they will plan an exit and as and when it happens, we certainly have the appetite to buy back their investment. Having said that, if we go for a total buyback, it will tie up funds for my growth. So we plan to buy half their stake and rest may be taken up by another PE player,” Raju detailed.
Investment bankers who are close to DivyaSree said that TPG-Axon investment will be worth upwards of $175 million at the current juncture.
A recent report by real estate advisory major - Jones Lang LaSalle on the private equity exits in the Indian real estate sector said that the Indian real estate investors have returned close to 23 per cent of the capital invested as compared to the global scenario, where the distributions by real estate private equity funds of 2006-07 vintage have been approx. 4.5 per cent of the capital called. “This indicates that Indian real estate performance has been to some extent less effected,” the report added.