The Largest Private Equity Indian Real Estate Deal

                                                                                         

In the largest private equity deal won by the real estate sector, Morgan Stanley Real Estate has invested Rs. 675-crore in Mumbai-based Oberoi Constructions for an undisclosed stake in the firm’s real estate projects. When it was reported in September 2006 that Oberoi Constructions was raising private equity from Morgan Stanley Real Estate Fund, a total of fourteen funds put in a bid for the stake, including Blackstone, Carlyle and GE, among others.

“We want to establish a pan-India presence as there is immense growth opportunities in other cities. At some point we will consider an IPO, but at present we decided to take the private equity route,” Vikas Oberoi, MD, Oberoi Constructions confirms, as his company lines up a number of projects for Pune, Hyderabad and Bangalore, for which land is to be acquired.

Kotak Mahindra Investment Bank that brokered the deal, sources say has valued the construction firm at $1-billion. “We’ve spent three years evaluating the business and have reached a valuation on the basis of the company’s individual assets and net asset value, and qualitative aspects like sourcing quality and design expertise. This is our largest investment in India’s real estate sector, which is a testament of our belief in the company,” Anand Madduri, Executive Director, Morgan Stanley Dean Witter Asia, who will be joining Oberoi Construction as a board member affirmed. On an average, the fund looks at a return of more than 30% annually and only recently invested $67.4-million in Mumbai’s Mantri Developers.

With interests in both commercial and residential projects, it plans to diversify into shopping malls, hotels, hospitals and education centres. It has ongoing residential and commercial projects in Mumbai’s suburbs, the Oberoi Mall in Goregaon, Oberoi Chambers and Garden Estate in Andheri, among others.

The real estate sector, which is growing at a whopping 35-40%, has seen large private equity deals in the last few months, with nearly $350-million in investments flowing in. Bangalore-based Nitesh Estates received a $100-million shot in the arm from Siachen Capital, while HDFC Real Estate has invested $35-million in Vascon Engineers, a Pune-based developer. And this, as more than 20-funds are interested in India’s real estate sector.

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Source: IndiaRealEstateblog

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