Realty PE fund Lapis India exits Sobha’s Bengaluru project

Realty PE fund Lapis India exits Sobha’s Bengaluru project

By Joseph Rai

  • 31 Jan 2017
Credit: Shah Junaid/VCCircle

Realty-focused private equity firm Lapis India Capital Advisors Pvt. Ltd has fully exited its investment in a project of public-listed real estate firm Sobha Ltd with two times returns amid a slowdown in the sector, it said in a statement.

The private equity firm, formerly Sun-Apollo, had invested Rs 50 crore in Sobha Palladian project in Bengaluru four years ago and has now received Rs 98 crore, it said. Sobha has relied on internal accruals to buy back the stake from Lapis India.

The investment in 2012 was done through a 50:50 special purpose vehicle (SPV), Sobha Highrise Ventures Pvt. Ltd with both parties bringing in Rs 50 crore each for the project.

The foreign direct investment (FDI)-compliant project involved development of a residential complex spread over 5.625 acres in Varthur Hobli, Bangalore East and will have 3 and 4 BHK apartments. 

"We are probably one of the first companies in the Bengaluru real estate market which has been able to give exit to a PE fund partner with handsome returns, given the current slow moving realty sector market," said JC Sharma, vice chairman and managing director, Sobha.

Investment activity in the real estate sector plummeted last year, in line with the overall slowdown in private funding and as the sector continues to struggle with weak demand. The government's demonisation drive has further cast a shadow over the sector that has highly been cash dependent.

However, the sector is expected to bounce back and become more regulated following two major reform measures announced last year -- the Real Estate (Regulation and Development) Act 2016 and the Benami Transactions (Prohibition) Amendment Act 2016.

Sobha, founded in 1995, is focused on residential and contractual projects. The company has a net worth of $25 billion with a presence in 25 cities across 13 states in the country. 

Its consolidated revenues during FY2015-16 were Rs 1,878 crore, a decrease of 23.5% from the previous year. Of this, real estate accounted for Rs 1,256 crore or 66.84% of the total revenues, according to its annual report.

Shares of the company on Tuesday ended at Rs 259.95, up 0.68% on the BSE in a weak Mumbai market which fell 0.70% to close at 27,655.96

Sun-Apollo was developed from a strategic partnership between Sun Group, a business and investment group principally owned by the Khemka family with operations in India, Russia and eastern Europe; and AREA Property Partners, formerly known as Apollo Real Estate Advisors, an active global real estate investor and fund manager with operations in the US and Europe.

Other recent private equity includes India Infoline Finance Ltd (IIFL) exiting a residential project of Mumbai-based Ceear Realty.

In October last year, public market-focused private equity firm WestBridge Capital that bet on a string of firms in the real estate and ancillary business after its founders decided to move on from Sequoia Capital in 2011, struck its second exit from a property developer.

Real estate developer Ekta World also gave an exit to private equity firm Sun AREA Property Partners for Rs 256 crore ($38 million) on an investment of Rs 135 crore ($20 million) last year in October.

Like this report? Sign up for our daily newsletter to get our top reports.