News: Pantaloon arm to raise $280 m fund for hotel sector

(BL 27/08/2006) New Delhi - Kshitij Investment Advisory, the asset management arm of Pantaloon Retail India (now known as the Future Group), is in the process of raising a new $280 million fund dedicated to the hotel sector.

According to Sanjeev Dasgupta, CFO & Head - Investments, Kshitij Investment Advisory Co (KIAC), the fund would be raised from foreign investors and should be closed in the next three months. "We are likely to close the fund among two to three major foreign investors", he added.

Recent studies have indicated an acute shortage of hotel rooms in the coming years in India. This is especially the case in non-metro, tier-one cities.

Further, the new hotel fund may also have synergies with Kshitij's current Horizon International Fund, which is investing in large retail projects. Around eight to nine of the proposed projects under Horizon will also have hotels.

The $350 million Horizon fund was closed in June this year and so far about 10 per cent of the amount raised has been invested. "We propose to invest the balance amount over the next two-and-a-half to three years", Dasgupta said. The Horizon fund would be investing in large-scale projects such as `market cities', three of which are coming up in Mumbai, Bangalore and Chennai. The first of the `market cities' is coming up in Mumbai and would be a retail plus hospitality project spread across 2.8 million square feet.

According to Dasgupta, raising the funds would not pose a problem given the keen interest among foreign investors in investing in these sectors in India. "For instance, the interest level for the Horizon fund was to the level of $700-800 million, but we decided to keep a cap of $350 million", he said. In fact, CapitaLand, South East Asia's largest property developer by market capitalisation, alone invested $75 million in the Horizon fund.

CapitaLand is also in two 50:50 joint ventures with Pantaloon - in a mall management company and a fund management company.

KIAC also manages the KVC Domestic Fund, which has a corpus of $80 million (raised from high net worth individuals, corporates and financial institutions). The KVC fund has already committed investments into markets such as Ahmedabad, Indore, Cochin, Chennai, Mysore, Trichur, Mumbai, and Ranchi among others.