News: Indiareit floats $160-m offshore fund

(BL 03/08/2006) Mumbai - Indiareit, the India-focused real estate venture capital fund, announced the launch of its offshore fund. With a proposed corpus of $160 million, the offshore fund would invest in projects governed by the foreign direct investment (FDI) guidelines for real estate in India.

The offshore fund of Indiareit follows in the heels of the recently launched Rs 350-crore domestic venture capital fund.

Promoted by Ajay Piramal, Chairman, Piramal Enterprises, the offshore fund has bagged the investment support of 3i, Europe's leading private equity and venture capital company. 3i has committed itself to an investment of $40 million in the Indiareit Offshore Fund.

Speaking to Business Line, Piramal said that the fund would open by mid-August. "While the proposed fund size is $160 million, we also have a greenshoe option of 25 per cent which we can exercise," he said.

Commenting on 3is cornerstone investor status, Piramal said, it would be a symbiotic relationship where Indiareit will benefit from 3i's proprietary systems and procedures and its vast international exposure in the venture capital business.

"3i has a good understanding of the real estate business worldwide. They are quoted on the LSE and on the FTSE 100," Piramal said.

Equity partnerships

The offshore fund would be looking at equity partnerships in both residential and commercial real estate projects. "Our aim is to partner with other developers and fund them.

"In this instance we propose to look beyond large metros to cities like Bangalore, Hyderabad, Ahmedabad etc," Piramal said.

SEZ projects

On the surge in setting up of SEZs, he said they are open to working with developers or partnering SEZ projects. While refusing to divulge details of the projects in the pipeline vis-à-vis its domestic venture capital fund, Piramal said it would be made public in two-three weeks time.

Independent projects

Upon enquiry, the Piramal Chairman said that the Indiareit fund would take up independent projects and ruled out any tie-ups with Peninsular Land Management Company. The Piramal Group restructuring a year ago had resulted in a merger of the group's real estate business - Morarjee Realties and Piramal Holdings - to form a new entity called the Peninsular Land Management Company.

The investment objective of Indiareit will continue to be long-term capital appreciation by means of equity participation in specific real estate projects based on clearly identified sectoral gaps across residential, commercial and retail segments in various geographical locations.

According to Chris Rowlands, 3i's Head of Group Markets, "The Indian real estate market is still young but very promising. Indiareit presents an attractive means for 3i to work with an experienced and reputable partner and gain access to the market at this early stage."

Mark Thornton, Managing Director and Co-head Asia of 3i, will be appointed to the Investment Committee of Indiareit Fund by virtue of the cornerstone investor status accorded to 3i by Indiareit.

The Indiareit Fund is a boutique real estate venture capital fund, promoted by Piramal Enterprises. The fund is registered under the SEBI (Venture Capital Funds) Regulations and has Indiareit Fund Advisors Pvt Ltd as its investment advisors. Piramal Enterprises is a diversified Rs 3,500- crore Group with global footprints.