Indiareit Fund Advisors, the Ajay Piramal group-promoted realty fund which manages around Rs 1,900 crore worth of money, raised nearly Rs 400 crore from high net worth investors (HNIs) last week for its domestic real estate fund. Ramesh Jogani, managing director, talks to Raghavendra Kamath on the private equity (PE) scenario in Indian real estate and the company’s recent fund raising. Edited excerpts:
You launched your fund in October last year. Why did you take so long for the initial closure?
Though we had all the requisite clearances by October-November, the wide array of distributors whom we managed to bring on board had to ensure internal compliance from their head offices abroad. This took time and the process gathered full steam only around February-March, subsequent to which we successfully managed the initial closure by the end of May.
Since Piramal Healthcare made Rs 18,000 crore by selling its domestic formulation business to Abbott, do you expect more action on the PE venture of the group now?
I can’t comment, as Piramal Healthcare is a completely different line of business and there are Chinese walls in operations between the companies.
Other property funds say AIM-listed Trikona shortlisted you as fund manager as you quoted very low fees. Your comments.
No comments.
Has fund-raising become very competitive, with so many fund managers and real estate companies vying to raise funds?
It has been competitive and will remain so. It is all about how competent the fund is. It depends on the track record of the fund manager, the fund’s management team and an understanding of the sector. Indiareit has been able to get all leading distributors to distribute our latest offering, a testimony to our investment strategy and track record.
There are a lot of complaints that property funds are extracting a lot from real estate developers now, as they are in a tight financial situation.
Non-performance by some PE funds initially forced them to cover lost growth by seeking higher returns in the form of preferred structures or higher-rate mezzanine financing. Indiareit, however, is a pure equity investor. Thus, the question of unduly extracting from developers does not arise, since our returns are inherently linked to the success of the developer.
Don’t you think PE funds are also responsible for the rally in property prices?
Not at all. Property prices are not driven by developers or PE funds. It is the simple economic law of a mismatch between demand and supply which drives up prices. If you notice, apart from Mumbai, all other cities have seen an increase in volumes and prices have not gone up. In Mumbai, prices have become unaffordable; hence, I feel Mumbai is due for a correction of around 15 per cent in the next few months.
How do you look at a dozen public offers by realty companies which are in a limbo? You are also one of the investors in these.
Real estate is cyclical in nature, as is any other business. Thus, even though the appetite for real estate IPOs is less at present, with a change in conditions, which we have begun seeing, the IPOs will happen. They can only be deferred, but their happening is not to be doubted. As regards PE funds, it must be appreciated that private equity investors are different from IPO investors. PE funds have a longer horizon and if an exit is being looked at through an IPO, the exit may get delayed, but that does not mean the fund will necessarily be negatively impacted.
How do perceive the financial condition of property developers, who need to repay Rs 25,000 crore during the current financial year?
The developers need to reduce the debt burden. Otherwise, there will be more pain.
