ICICI Prudential AMC, IL&FS Investment Managers invest Rs 225 cr in Amrapali

ICICI Prudential AMC and IL&FS Investment Managers (IIM) are investing Rs 225 crore in Noida-based developer Amrapali for two separate projects in Noida.

The developer is issuing compulsory convertible debentures (CCD) to raise Rs 150 crore from ICICI Prudential AMC's domestic fund for its project Silicon City in Sector-76, Noida. CCDs are usually considered similar to equity but are structured in such a way that they resemble debt.

IL&FS Investment Managers is investing Rs 75 crore for a 24% shareholding in Amrapali's Princely Estate project in Noida, said a person close to the development.

A spokesperson for Amrapali confirmed the two deals but did not comment on specific details. Mails sent to ICICI Pru AMC and IIM did not elicit any response.

The company plans to use the money raised from the two private equity firms to quicken the pace of construction in the two projects as well as to pay off some of its high-cost debt. Amrapali has a total debt of Rs 500 crore.

In the last one-year, real estate developers have faced a liquidity crunch because of slack sales and high cost of debt.

Banks have also trying to reduce their exposure to real estate companies, which is forcing real estate companies to look for other sources of funds like private equity funds, non-banking finance companies and even individual money lenders to finish their projects on time.

"Residential projects are still the favoured option for private equity funds because of the ease of exits. In pockets, sales have not been a problem and a residential project in a good location is a better investment option for a fund than other asset classes in real estate," said Ambar Maheshwari, managing director, corporate finance at Jones Lang LaSalle India.

In 2011, private equity funds invested $1,656 million in the real estate sector and almost 80% of this was in residential projects.

In the past, Amrapali has raised Rs 90 crore from JPMorgan for its residential project Zodiac and Rs 300 crore from SUN-Apollo Ventures for a 200-acre integrated township project in Jaipur.

Source: http://articles.economictimes.indiatimes.com/2012-03-06/news/31127315_1_private-equity-funds-residential-projects-township-project