Mumbai: The $4-billion Essel Group has launched a Rs 1,000-crore real estate private equity (PE) fund as part of its asset management foray. The fund will have a corpus of Rs 500 crore, with an option to have an additional Rs 500 crore.
Subhash Chandra-promoted media company Zee Entertainment is the principal sponsor and anchor investor in the PE fund. Zee has put in Rs 100 crore and Chandra’s family office trust gave Rs 100 crore as part of the initial closure of the fund, which took place last week, said Amit Goenka, managing director and chief executive of Essel Financial Services, the new financial services arm of Essel Group.
The group got a licence for the fund called ‘India Asset Growth Fund Series I’, which will essentially do debt funding for the residential projects in top six metros, said Goenka.
“We will do last-mile funding and bridge financing facilities to developers and target 20-22 per cent internal rate of returns from our investments,” Goenka added. The group is also looking to launch an offshore fund of $100 million in the next three-four months to augment the first fund.
After Series I, which is focusing on residential assets, the group is also looking to launch Series II sometime next year, which will invest in education assets.
The Series I fund has already deployed some funds and it is in the process of deploying the rest over the next couple of weeks.
The fund has deployed Rs 40 crore in a residential project in Chennai and plans to invest Rs 80 crore in a project in Mumbai next week, followed by a Rs 60 crore investment in a residential project in Gurgaon, he said. “We will mainly compete with non banking finance companies (NBFCs) and PE funds, which do mezzanine financing (a hybrid of debt and equity financing),” he added.
The Essel Group has appointed a six-member investment committee and a 12-member investment committee to manage the fund.
The group has proposed the names of former chairman of Knight Frank, Pranay Vakil, former chairman of Bank of Baroda, Anil Harish, former chairman of PwC, Jairaj Purandhare, and former chief of the Institute of Chartered Accountants India, Mukund Chitale, on its investment committee.
The fund-raising scenario in real estate is bouncing back in 2013. According to data from VCCedge, 15 India-dedicated realty funds have raised $1 billion in 2012, against $911 million by eight funds in 2011.
In 2013, two funds have raised $91 million. Avenue Real Estate Fund has closed its fund by raising $64 million, while ArthVeda Star Fund has raised $26.8 million in 2013.
Indiareit Fund Advisors, the PE arm of Ajay Piramal’s Piramal Enterprises, announced plans to raise Rs 200 crore over the next three months for its fifth domestic real estate fund.
The domestic fund has a total corpus of Rs 750 crore with an option to expand by Rs 250 crore. Indiareit is also planning to launch an offshore fund of $300 million (Rs 1,632 crore) next month from investors in Europe, Asia and Australia.
Other major funds in fund-raising mode include Redfort India Real Estate Fund ($500 million), Shapoorji Pallonji Real Estate Fund ($500 million) and ASK Real Estate Special Opportunities Fund ($220 million)
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