India: Essel Finance plans $75m fund to invest in residential projects

Essel Finance Advisors and Managers Llp, the private equity (PE) arm of Subhash Chandra’s Essel Group, plans to raise Rs.500 crore ($74.5 million) from domestic investors to invest in under-construction residential projects, said a top company executive.

The new fund, ASSET-2, will offer structured debt to mid-income residential projects in top cities, similar to its first fund ASSET-1.

Essel Finance Advisors and Managers is the sponsor of the new fund and will contribute 10% of the corpus. “We have started raising money and have got good response from investors. We continue to remain focused on investing in affordable and mid-income projects. When the market is stagnant, it is better to have a conservative strategy,” said Abhinav Bhushan, chief executive-private equity, Essel Finance.

He added that in a challenging market, it is important to secure deals, which is why the fund will invest not just in ongoing projects, but those where sales collections are at a healthy stage.

Based on commitments it has received from investors, Essel Finance is close to investing Rs.125 crore across two transactions, in Chennai and Bengaluru, from the new fund. Bhushan declined to give more details on the deals.

Essel Finance has earlier invested Rs.250 crore from its first fund—ASSET-1. The fund was invested across eight investments and has already managed an exit from its investment in Parsvnath Developers Ltd’s project in Gurgaon.

PE investments in real estate dropped 42% in the six months ended 30 June from a year earlier, as the supply of quality new projects dried up due to a persistent slowdown in home sales. PE funds invested about $954 million in real estate projects from January to June this year, compared to $1.66 billion in the same period in 2015, according to data from investment tracker VCCEdge and Mint research.

“As the residential market will not witness price appreciation, it’s better to make investments by way of senior secured debt. Debt structures not only offer high security levels along with minimum returns, they also ensure regular income to the investors,” said Bhushan.

“We have already made 17 return payouts to our investors of ASSET-1 fund. Due to good return payouts, we are witnessing a lot of repeat investors in our follow-on fund,” he said.

Several funds are in fund-raising mode this year, as demand for capital among developers remains high, with project cash flows continuing to be weak.

Indiabulls Alternative Investments Ltd is raising up toRs.1,000 crore for a new fund from non-resident Indian (NRI) investors based in West Asia, Asia-Pacific and Europe. IIFL AMC Ltd is raising a Rs.750-crore debt fund, which will be India’s first category-3 AIF (alternative investment fund) real estate fund.

Category III AIFs are allowed to borrow from any lending institution for the purpose of generating higher returns with cheaper capital, apart from tapping investors for money.

Eagle Capital Advisors Pvt. Ltd, backed by Jaydev Mukund Mody, founder of casino firm Delta Corp. Ltd, has launched Alpha Advantage Real Estate Fund which plans to raiseRs.500 crore along with a green shoe option of another Rs.500 crore.

“Fund-raising environment is still a bit challenging. In a situation where the real estate sector is yet to see full recovery, the pedigree of the fund manager, the team and investment strategy would play an important role when one reaches out to limited partners or investors,” said Chintan Patel, partner, deal advisory-real estate and hospitality, KPMG India.

Also Read:

India: Essel Finance final investments from maiden realty fund

This article was first published on Livemint.com

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.