Realty stocks plunge on RBI rate hike

22 Mar 2010, 1120 hrs IST, PTI

MUMBAI: Stocks of realty firms slipped as much as 4 per cent on the Bombay Stock Exchange (BSE) after the Reserve Bank hiked key interest rates to tame inflationary concerns, a move that could make home loans dearer. 

Realty firm Unitech slipped to Rs 70.55, down 4.27 per cent and country's largest realty player DLF fell 3.53 per cent to Rs 301.65 on the BSE in the early morning trade. 

Realty index on BSE which comprises 14 realestate stocks slipped 2.59 per cent to a low of 3,254.26 points. 

"Realestate sector is rate sensitive, rate hike by the Reserve Bank of India will make home loan costly for the common man in turn affecting the product of the realty estate firms as their will be less buyers," SMC Capital Vice-President Rajesh Jain said. 

Other stocks who were under pressure are -- Indiabulls Real Estate (down 3.03 per cent), HDIL (2.06 per cent), Ackruti City (1.16 per cent) and Sobha Developers (0.84 per cent). 

On Friday, the RBI hiked the short-term rates at which it borrows and lends funds to banks by 25 basis points each, adopting a tight money policy. 

The Central bank raised the repo( rate at which it lends to banks) and the reverse repo rates (the interest it pays to the banks on deposits) by 25 basis points each to 5 per and 3.5 per cent, respectively.

CCCL Infra looking at PE for Rs 2,000 cr investment

Business Standard: March 10, 2010

Chennai: CCCL Infrastructure Ltd, part of the Chennai-based Consolidated Construction Consortium Ltd, is planning to raise money through private equity for its proposed investments to the tune of around Rs 1,500-2,000 crore. Besides, the company is also planning to foray into power generation and logistics business.

Speaking to Business Standard E Viswanathan, chief executive officer, CCCL Infrastructure Ltd said over the next 18 months the company is planning to invest around Rs 1,500 to Rs 2,000 crore in various projects.

“We are looking for private equity fund to partly fund the investment.” The company is presently in the process of evaluating the value and proposed dilution, he added.

The proposed investment includes Rs 153 crore to create infrastructure at Pearl City Food Port (SEZ), a special economic zone for food processing industry being set up by the company at the port city of Tuticorin in south Tamil Nadu.

“The first unit, being set up by Hexa, a honey maker, is likely to start production by end of this month in the SEZ.”

The company has acquired around 900 acres for setting up the SEZ which will also have a residential project, helipad, hotels, golf course and others.

“One of the first of its kind infrastructure would be automated movements of goods within SEZ.” Since the SEZ will cater to export market, especially to quality-sensitive markets, no vehicle will be allowed inside the SEZ, and the entire SEZ will be automated whereby any movement within the SEZ will be on conveyor, said Viswanathan.

“Housing project would cost around Rs 400 crore, which will be taken as part of phase II development,” he added. The company is also scouting for partners for schools and other commercial developments inside the SEZs.

The other projects, in which the company is planning to invest are automatic car parking facility in Delhi for an estimated cost of around Rs 272 crore and a Ro-Ro facility, for handling cars, at Chennai port for an estimated cost of around Rs 150 crore.

“We got L1 for setting up the automatic car parking facility, which will handle 1,500 cars. The project will be executed on a 30 year BOT model,” said Viswanathan.

Commenting on the proposed foray into logistics business, he said, the company has tied-up with a Korean-company, he declined to reveal the name, to create automatic RoRo facilities at Indian ports. “We will jointly bid for Chennai Port project first, which is estimated to be around Rs 150 crore.”

The company won Chennai-Tirupathi road connectivity project and likely to take up two more road projects. “Total aggregate value of these projects would be around Rs 1,500 crore.”

“The other major diversification would be power,” said Viswanathan. The company is planning to set up a one mega watt solar-based power plant at Tuticorin. The plant can be expandable to five mega watt. “We will finalise the papers by March.”

He added, the company will also look at bio-mass based power plants in Tuticorin, once the SEZ gets 60-70 per cent occupancy. “We can source raw materials for the power plant from the SEZ,” said Viswanathan.

IPO-bound realtors sitting on fence despite SEBI nod

Mumbai:

Less than a couple of months ago, real estate firms were in a tearing hurry to file their initial public offering (IPO) prospectus with the Securities and Exchange Board of India (SEBI).

And now, many firms are unsure if they should hit the market right away, even though they have got the ‘green signal’ from the regulator. While key indices have recouped their losses suffered in January, investors remain wary of realty firms.

The poor performance of the recent offerings in the sector is the main reason, while liquidity concerns because of the year-end factor is also keeping IPObound companies in check, say market watchers.

“We have received the required clearances from Sebi and are looking forward to coming out with our IPO in the near future,” said Abhishek Lodha, MD, Lodha Developers, without specifying a deadline.

Lodha Developers, Ambience, Emaar MGF and Nitesh Estates are the leading companies that are yet to open their books for subscription despite getting the blessings of SEBI.

Together, these four companies are looking to mop up around Rs 8,000 crore through their IPOs.

“Primarily, the market sentiment towards realty has not been very encouraging. Hence, a lot of players are waiting,” said S Subramanian, head of investment banking, Enam Securities.

In the past six months, the ET Realty index is down 22% compared to a 6% rise in the 30-share Sensex, reflecting investor apathy towards property developers.

“There is an investor fatigue for realty issues, because of an abundance of forthcoming issues, and also their performance on bourses has been lacklustre,” says S Sriniwasan, CEO, Kotak Realty Fund.

Recent listings of realty and infrastructure companies like DB Realty, Vascon and Godrej Properties have not been encouraging, with brokers attributing the downtrend to the issues being overpriced.

“Promoters are not ready to budge from the benchmark valuation of their companies and have been valuing their companies exorbitantly. Such unrealistic assumptions create a mismatch between the way an analyst values a realty company and creates a 30-40% inflationary element,” says market expert SP Tulsian.

Also, the government’s divestment drive has sucked out a lot of liquidity from the system. The latest public sector offering, NMDC, is aiming to raise between Rs 9,500-11,000 crore from the primary market. Moreover, as the financial year ends in March, most fund houses have exhausted their investment limits.

So, it appears that most realty companies may decide to open their issues in April. And as the IPO sanction is valid for one year, there are no regulatory compulsions. All that needs to be done is to update the quarterly accounts, said the promoter of a real estate firm which is awaiting Sebi approval. Source: MagicBrick

NHB Brings In Strategic Partner

National Housing Bank (NHB) has roped in another foreign partner other than Asian Development Bank (ADB) and International Finance Corporation (IFC) for its mortgage guarantee company, which is expected to commence operation by June. The name of the partner is not disclosed yet. Initially, NHB was supposed to hold 26% and ADB and IFC were to hold 13% stake each in the mortgage guarantee company. (Hindu Business Line)

RJ Corp Plans To Tap PE

RJ Corp Plans To Tap PE - RJ Corp, the diversified conglomerate owned by serial entrepreneur Ravi Jaipuria, plans to tap private equity funds or venture capitalists to raise funds for its global expansion in the unexplored, high-potential African market with plans to amass $180-200 million from the food and beverages business this year. The company plans to set up dairy businesses in Rwanda by the year-end and in Tanzania by mid-2010 through buyouts or greenfield ventures. In beverages, it plans to establish three greenfield plants this year—in Zambia by April-May, and one each in Zimbabwe and Malawi by the year-end. Source: ET

Century Real Estate Plans To Tap PE

Century Real Estate Holdings, the realty development arm of Century Group, is looking to raise Rs 700 crore to expand its development initiatives. The company is planning to tap capital markets to raise the fund in addition to the option of going to private equity players. The group, which has over 3,000 acres of land in and around Bangalore city, diversified into development of projects in 2007 and has delivered residential projects covering 1.5 million square feet in an effort to move up the value chain and derive more value for its land bank. (BS)

‘Venture Capital Is A Customer Servicing Business’

February 09 2010, 09:02:48 IST | SHRIJA AGRAWAL Source: VCCircle

Harshal Shah talks about RTVL’s new sector focus, performance of portfolio firms and exit strategy for Yatra.com.

Harshal Shah, the CEO of Reliance Technology Ventures Ltd (RTVL) and a member of the leadership team at Reliance Anil Dhirubhai Ambani Group, has a unique definition for the venture capital business. He believes VC firms are in the business of servicing their customers, who are portfolio companies and entrepreneurs. In an exclusive interview with VCCircle, Shah talks about RTVL’s new sector focus, performance of portfolio firms and exit strategy for Yatra.com. Edited excerpts:-

RTVL began as a corporate VC firm focused on technology and mobile sectors. We now see the firm diversifying into other sectors as well. What has triggered this?

When I looked at investing into technology in 2005, our mothership was Reliance Communications. We had access to knowledge of the ecosystem- the customers, the suppliers,  contracts, nature of financing and so on—as Reliance Communications was a Tier I and well-established mothership. That is why we started focussing on tech and telecom.

Subsequently, the other businesses of the Reliance ADA Group – Reliance Capital, Reliance Infrastructure, Reliance Energy, Reliance Natural Resources, Reliance Power, Reliance Media & Entertainment--started to grow. We again had access to the same kind of knowledge and experience in these businesses. So, it made sense for us to look at other sectors. We believe that information and knowledge is an incredible competitive advantage for us.

Which sectors look attractive to you?

It’s very difficult not to see technology as an underlying theme for most of the businesses. But, outside of IT and telecom, some of the areas that I find interesting are retirement homes, cleantech, real estate infrastructure enablers (like standardising pre made homes), aerospace component or equipment makers and defence.

Would you look at investing across all these areas?

These are some of the concepts we are toying with in our organisation. We not only plan to invest but might go out and seek some of these opportunities. As a VC investor, we are investing into areas which could become an industry in its own right in the near future.

How did your portfolio companies fare in the economic downturn?

I don’t look at venture capital as an investing business. It’s actually a customer service business. The customers are our portfolio companies, entrepreneurs and the top management team. It would be pretentious to believe that we are the only people with money. We believe our money is smart money, and if we can go across servicing our customers, then we end up making our money greener than anyone else. This makes our model very different from a lot of other VC firms.

Every single portfolio company of ours, despite the worst downturn last year, has seen an increase in valuations, taken away market share from its competitors and hired employees.  If you look at the average IRR, that has been generated by VC firms for vintage 2006, the returns have been negative 50%. Our annualised IRR is in excess of triple digits at the point of time across the portfolio companies. Not a single portfolio company of ours will be a dud. Our model is fool–proof.

How is Yatra (portfolio firm) faring against other online travel agents. Is an exit on cards?

Yatra is a leader in terms of market share and it enjoys the highest customer awareness and retention. People find the Yatra interface most comprehensive.

We are making good amount of money in Yatra. In fact, we have a large amount of cash in the bank now.

Should I exit this now or not, the way I see it is that should we continue to increase our IRR in the investments or not. Now, there’s a company called C Trip in China, similar to Yatra. Started in 1999, it got listed in 2003 at NASDAQ at a market cap of $300 million and it eventually became a billion dollar company in 2009.

IPO is a possibility but not a given at this stage. In a year or two, it could happen.
RTVL has also invested in a company (Stoke) based out of the US.  How do you plan to gain advantage from this? (Stoke develops carrier-class mobile broadband gateways to enable mobile and converged network operators to maximise the economic returns of their 3G mobile networks.)

We led the round in Stoke and then got other investors like KPCB, Seqouia and DAG Ventures on board. We got Dan Warmenhoven - CEO of Net Appliance, a data centre management company -- to join the board.

We have set up its office in Bangalore to achieve cost arbitrage. When 3G- 4G happens, Stoke should be the de facto choice for this kind of product.

What are the recent investments that you have made?

We are seed investors in Scalable Display Technologies Inc, founded by Rajeev Surati. He is to instant messaging what Sabeer Bhatia is to Hotmail. Just when Bhatia sold his company to Microsoft, Surati also sold his company Flash Communications to Microsoft. What we use today for instant messaging is based on his (Surati) technology.

As part of his thesis at MIT, he wanted to come up with better forms of projections to be used for the media & entertainment industry. He has 12 PhDs working with him and he also has a full time MIT professor on the company’s board. Scalable Displays has already broken even. (Scalable Display simplifies the creation of super-resolution, multi-projector displays of the highest quality and scalable size.)

So, if you connect normal projectors with Scalable’s software, it actually eliminates the need for having screens. This company has got contracts from the US department of defence, and from Japanese companies such as Sony, Hitachi, Toshiba and others. 

Times Private Treaties Sets Sight On Real Estate Sector

Mar 09, 2010 – Times Private Treaties has in the first two months of the year invested in quick succession in Kumar Properties and Kanakia Spaces. Times Private Treaties has spread its investment across a mix of firms in pursuance of its strategy of expanding the advertising market and bringing a larger number of firms into the advertising market. 

Times Private Treaties has closed a deal with Kumar Properties, a diversified group founded by Mr K H Oswal over four decades ago. The company has evolved over the years from builders of apartments to high rise buildings, bungalows and large sixe complexes. Over the past decade, the company has diversified into Information Technology Parks, commercial buildings, large townships and malls. The firm also has a strategic alliance with GIC Real Estate. 

The investment in Kanakia Spaces took place in the last part of January.  The company is engaged in real estate activities in suburban Mumbai and is part of the Kanakia Group, the premium real estate developers in Mumbai. The Group has to its credit 8 million square feet of delivered residential and commercial properties and has another 23 million sq ft under construction. 

The investments by Times Private Treaties are seen as the return of the real estate market. The demand for offices is coming back according to reports and there is some firming up of prices in Bangalore and Mumbai. However, that said, much of the recovery is still in pockets, with demand mostly coming from telecom, biotech and financial services, with most companies consolidating small offices into one big space. 

Given the context, the Times Private Treaty model fits the real estate sector well at a time when higher visibility through advertising is an essential component of the market strategy. The Times Private Treaties’ innovative approach to giving companies a fast track to the market by offsetting the cost of advertising space to equity seems to be a classic solution to helping both the advertising market expand while giving companies a good alternative to keep their brand building going. While being a risk sharer by selling out space against future gains, the invested company tends to be the winner by getting considerable advertising muscle.

Trikona Advisers claims Rs 800 cr damages

BS Reporter / Mumbai February 24, 2010, 0:54 IST

Trikona Advisers (TAL), the erstwhile advisor of UK-based, India-focused real estate company Trikona Trinity Capital Plc (TRC), today said it would claim £112 million (Rs 800 crore) in damages from the latter for “unlawful attempt to terminate’’ the management agreement with it.

TAL said TRC, a London Stock Exchange-listed company, terminated the agreement six years earlier than the scheduled ending. The agreement was for 10 years, from April 16, 2006, it said.

On December 10 last year, TRC announced termination of the portfolio management agreement with TAL, alleging breaches by the latter. In reply, TAL said it would seek substantial damages if the agreement was terminated on March 16, the scheduled date of termination.

TRC has investments in Uppal IT park in Greater Noida, Rustomjee’s township in Mumbai, DB Hospitality and DB Realty, among others.

TAL has already moved the London Court of International Arbitration (LCIA) against TRC. In a press statement, it claimed two hedge funds were responsible for the trouble. According to TAL sources, QVT and Carrousel had forced changes in the TRC board and its representatives now had major positions on it.

“For over two years now, TRC has been under attack from two hedge funds. They took a position in the Fund because of the successful performance and returns created under the management of TAL, but are now seeking an exit,” a spokesperson of TAL said.

“These hedge funds have a track record of activism and for closing down funds early in the cycle to realise cash for short-term gains, and this is what is happening to TRC,’’ the spokesperson added.

TAL cited examples of AIM-listed entities — Treveria plc, the German retail-focused real estate investment company, India’s Hiranandani family’s investment vehicle, Hirco, and South African Property Opportunities — wherein the hedge funds demanded the exit of directors, including incumbent chairmen.

“Our management contract stands in the way of their strategy because it lasts for 10 years, so we are being unfairly treated publicly and falling victim to their strategy,’’ the TAL spokesperson said.

It said it had instructed a number of law firms to invoke its contractual rights, including London law firm SJ Berwin LLP, to pursue TRC. However, TRC seems in no mood to budge. Source: Business Standrad