Blue River in race to co-invest in Brigade

PRIVATE EQUITY WATCH

Blue River Capital, an India-focused private equity fund, has joined the race to co-fund a Rs 500 crore equity infusion into the Bangalore-based realty company, Brigade Enterprises.

According to industry sources, Blue River is among three funds in the race to fund Brigade's expansion plans in the hospitality sector. In addition to this PE funding, Brigade is looking to raise around Rs 700 crore from the capital markets shortly.

Blue River Capital is focused on providing expansion and growth capital with $140 million under management with Edelweiss as the strategic partner. Sources indicate that Brigade Enterprises would use the PE funding to set up four hotel projects in Karnataka, with two in Bangalore, one each in Mysore and Chikmagalur.

Brigade has forged a pact with Starwood Group of Hotels to build a five-star property in the heart of Bangalore and Mysore. Both will be Rs 300 crore 250-room projects and Brigade is looking at other two properties in the same range of just under Rs 300 crore.

"The total outlay of the hospitality projects will be in the range of Rs 1,200 crore and as there is a 49 per cent cap on foreign investment in the hospitality sector, Brigade is targeting around Rs 500 crore," sources close to the company said.

Brigade Group Managing Director M R Jaishankar said they were in the process of applying for an initial public offer and there is no change from that. If this deal sails through, it will be Blue River's fourth investment after the ones in KPR Mill (Rs 105 crore), Aurangabad Electricals (Rs 40 crore) and KMC Constructions (Rs 140 crore).

According to sources close to the Brigade Group, it is imperative that the company ties up funding as early as possible as Starwood is targeting to start operations in Bangalore by April 2009. In addition, Brigade Group has a similar pact with Singapore-based Banyan Tree Hotels & Resorts to set up a super-premium resort and spa at Chikmagalur, which is a four-hour drive from Bangalore.

Brigade Group, which has a significant number of properties across Bangalore in residential and commercial sectors, is stepping on the gas to prop up its hospitality wing. It operates a few serviced apartments under the 'Brigade Homestead' brand and a couple of other high-end clubs like the Woodrose Club. So far the company has 89 operational keys and one Woodrose Club with 26 operational keys.

"The pact with Sheraton will catapult this company into top league in the hospitality business and is expected to consolidate its brand further," the source added.