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Tuesday, June 15, 2010

Lodha eyes PE for Mumbai project

Lodha Developers is in talks with several private equity funds to sell stake in a Mumbai project to build the world's tallest residential tower, its managing director said today.Last week, the developer said it would invest $426 million to build a 117-storey residential tower in central Mumbai and that the company could consider selling a 10-25 per cent stake."We are in talks with several private equity players but there is no transaction yet," Abhisheck Lodha told the Reuters Global Real Estate and Infrastructure Summit.
Media reports have linked Singapore funds GIC and Temasek with the project, but Lodha declined to specify names.The Mumbai-based developer said it would hold back its planned $600 million initial public offer until stock markets stabilise and is banking on stronger-than-expected sales to tide over immediate cash flow needs."We have taken a decision that we will go to market only when there is certainty to the market environment and we can price in a manner that investors make money," Lodha said."We hope the situation will work out in the next 2-3 months."Lodha, which focuses on high-end residential apartments in and around India's financial capital, sold about 7 million square feet last fiscal, but expects sales to be 50 per cent higher in the current fiscal year to March."The company has done much better than we forecast last year. Our funds requirements are being met from internal resources and there is no immediate need for additional capital," he said.The company, which has about 30 million square feet under development across 38 projects, is estimated to hold a market share of 15 per cent in Mumbai, rated among the most expensive property locations in the world.
Since mid-2009, about 16 Indian developers have lined up plans for initial public offers to raise about $6 billion, buoyed by the 81 per cent rise in the Mumbai stock index last year and on the back of reviving property demand.But a lacklustre stock market this year, a crowded calendar of public offers from state-run firms and a looming rise in interest rates are threatening to derail their fundraising plans.Only three developers have actually launched IPOs this year, with all of them depending on demand from institutions to fully cover the offers.

Lodha Developers, set up in 1980 by Lodha's father Mangal Prabhat, a politician with India's main opposition Bharatiya Janata Party, has steadfastly focused on Mumbai.The developer has accumulated 250 million square feet in the land-starved city, seeing value in catering to a market where millions aspire for their own homes but only about 20,000 apartments were delivered last year."As income levels rise, aspirations are also rising, and there is demand in every segment of the market. The problem is there is a huge supply side constraint, which impacts pricing," Lodha, a former consultant with McKinsey & Co, said.Property prices in major Indian cities such as Mumbai and Delhi have nearly doubled in the past year, as buyers return and mortgage rates remain in single-digits, but Lodha remains bullish, expecting prices to rise 10-12 per cent more this fiscal.His firm last month paid more than twice the asking price to win a plot of land in central Mumbai for $850 million, in what was India's biggest land deal.Lodha, which counts the private equity arms of ICICI Bank, Housing Development Finance Corp and Deutsche Bank among investors in its major projects, plans to build 4,000 to 5,000 high-end apartments at the site over 5-7 years and has estimated revenues of about $2.25 billion from the project."We continue to actively look at all large opportunities in Mumbai. It offers us the best opportunity to keep growing profitably."

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