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HDFC Property Fund (HIREF), a closed-end real estate private equity (PE) fund, sponsored by Housing Development Finance Corporation, has distributed a majority of its stake in Pune-based Vascon Engineers (VEL) to existing investors at a loss of 75-80 per cent.
Sources said this was one of the last major investments the PE fund was holding on to after it completed its seven-year tenure in 2013.
The fund held 12.83 per cent in Vascon, now pruned to 2.4 per cent. According to sources, HIREF had invested 10 per cent of the fund's corpus in VEL.
Senior officials in HDFC Venture Capital confirmed the development: "HDFC Property Fund (HPF) had invested in Vascon Engineers Ltd (VEL), which subsequently got listed. The companies in engineering, procurement and construction (EPC) space have been hit due to market downturn and consequent business slowdown. Hence, the market price of VEL has also fallen, like that of other EPC companies. This is one of the only investments wherein the fund incurred a loss and the only listed investment."
The fund had completed its tenure of seven years in 2013 and sought an extension from the investors for two years (as allowed in the mandate). "VEL has proposed to come out with a rights issue of shares wherein it is proposing to raise Rs 100 crore. The fund tenure of HPF has ended, so HPF decided to distribute the shares held by it in VEL to its investors proportionately in an off-market transaction. Investors would now directly hold the shares and consequently be able to directly subscribe to the rights issue," said the official.
After this exit, the PE fund will have only one investment left, South India-based real estate projects company Ozone, in which it had invested Rs 25 crore.
It is expecting to make profits of Rs 125 crore on this investment.
HIREF, a seven-year close-ended fund, was launched in 2005 with a corpus ofRs 1,000 crore and 46 domestic investors including leading public sector banks, companies and high net worth individuals.
Senior officials of HDFC Property Fund said it was in the process of exiting its investments in its $800-million offshore fund. It is also in the process of raising another offshore real estate fund, of $500 million in the next three to four months.
VEL's promoters hold 38.54 per cent in the company, while 52.59 per cent is held by corporate bodies. The stock closed at Rs 15.15 on Wednesday, down 0.3 per cent from Tuesday. In the fourth quarter of 2015, the net sales were Rs 172 crore and the net loss Rs 75 crore.
