In one of the largest FDI deals in Indian realty, Morgan Stanley’s Special Situation Real Estate Fund has invested $152 million in Mumbai-based developer Oberoi Constructions.
While officially there was no statement on the equity size picked up by the Morgan Stanley Fund save that it was a ‘minority stake’, it is reliably learnt that it is a 10.75% stake.
Anand Madduri, the Hong Kong-based executive director of Morgan Stanley’s Asia-Pacific Property portfolio, claimed the Oberoi deal was the single largest foreign direct investment (FDI) in India’s real estate sector so far. Oberoi Constructions is a fast-growing firm in the financial capital, and has no connection with the hotel group of the same name.
"The closest is Farallon Capital’s investments in Indiabulls at around $143 million. However, these were in several tranches spread over 24 to 30 months," Madduri added.
US-based hedge fund Farallon Capital has taken a 60% stake in Indiabulls Property which has in turn picked up two NTC textile mills in Mumbai in separate public auctions.
The Morgan Stanley realty investment of $152mn for a 10.75% stake implies that Oberoi Constructions has derived a valuation of a little over $1.4 billion.
Since Oberoi Constructions has a turnover of a little over Rs 600 crore per year, the high valuation by international investors is largely a derivative of the high asset value given to the land banks built up by the company.
Four major property projects are being developed by the company - 8 million square feet in Goregaon in a mall and a residential project on what used to be Novartis land, two million sq feet each at Jogeshwari’s Fantasy Land and Mulund’s Glaxo SmithKline (GSK) land and an additional 8 lakh sq ft at Andheri’s Excel Industries land.
"All these projects are FDI-compliant, and we have taken care to buy property titles that are FDI compliant," Vikas Oberoi, the company’s chief promoter, told HT.
He clarified that the joint venture with ICICI Venture at Worli on what used to be Glaxo’s land, is not FDI compliant, and was part of a separate SPV (special purpose vehicle).
Madduri said there were no plans to ramp up Morgan Stanley’s investments in Oberoi Constructions in the future. "The company will continue to acquire land, and these can be leveraged for future funding," he added.