Red Fort to launch 2nd offshore fund in April

Red Fort Capital, the investment manager of Cayman Islands-based Red Fort India Real Estate Fund I, is planning to launch a second offshore fund next month with a corpus of Rs 3,200 crore ($800 million) to invest in the Indian real estate.

The fund will be named Red Fort India Real Estate Fund II and is expected to close in June this year. Red Fort is targeting individual investors, corporate entities, pension funds, insurance companies, foundations, endowments and governments in Europe, the US and other countries, according to Subhash Bedi, partner, Red Fort Capital.

The fund will invest in FDI-compliant projects in the residential, commercial, retail and hospitality sectors and has an investment threshold of Rs 40 crore ($10 million). ''We are expecting returns of 30 per cent,'' Bedi said.

According to a Business Standard report last week, the Foreign Investment Promotion Board (FIPB), at its meeting on March 7, had rejected a proposal by Red Fort India Land and Realty Fund to bring investments from offshore corporate entities owned by non-resident Indians (NRIs) into its domestic fund.

But Bedi said the company was on track to close the Rs 1,000-crore domestic fund in June, along with the yet-to-be-launched offshore fund. The domestic fund will have an investment threshold of Rs 50 lakh.

"We have already received Sebi's approval for the domestic fund and applications were only rejected from NRI investors. However, we were not marketing the fund to NRIs. We only wanted to bring in some strategic NRI investors,'' Bedi said.

Bedi said the volatility in stock markets would provide a good opportunity for investors to diversify and invest in the property sector. "We have given returns of 55 per cent to our international investors with our first offshore fund,'' he added.

The company's first fund, Red Fort India Real Estate Fund I, allocated its entire corpus of Rs 1,600 crore ($400 million) to the Indian property market. Its main investments included Rs 400 crore ($100 million) in projects of the Bangalore-based Prestige Group and township project of the Hyderabad-based Indu Group.

A host of global private equity players, including Blackstone, Citigroup, Morgan Stanley and Tishman Speyer and domestic funds of ICICI, Kotak and HDFC, has committed or invested nearly Rs 20,000 crore ($5 billion) in the Indian realty sector.

The renewed interest of PE funds in the country's realty sector can be attributed to returns in excess of 25 per cent provided by Indian properties and the stagnant nature of developed markets, according to estimates.

Red Fort is evaluating plans to list a real estate investment trust (REIT) on the Singapore Stock Exchange.