Press Release Summary: The dramatic meltdown and subsequent acquisition of Lehman Brothers, the world’s fourth largest investment bank, might have left many Indian real estate developers gasping, due to increased dependence on foreign private equity funds.
Press Release Body: The dramatic meltdown and subsequent acquisition of Lehman Brothers, the world’s fourth largest investment bank, might have left many Indian real estate developers gasping, due to increased dependence on foreign private equity funds. However, major players in Hyderabad are breathing easy. Bharat Infratech, which launched one of India’s largest residential projects at Kondapur in June this year with a combined investment of over Rs 400 crore involving a land bank of 500 acres with Lehman Brothers and Tiger Global, is thanking its stars. “
Events at Lehman Brothers Holdings will have no bearing on the progress of any of our projects as all of them are already funded and will go ahead as planned. Further, the investments in Bharat are governed by the Indian laws for FDI investment and the lock-in period stipulated therein,” said Srinivas Manda, marketing head. But industry analysts are not too sure; they feel that the company’s ambitious plans will be hit. Amongst others who have already received their entire funding is B Seenaiah & Company Projects (BSCPL) that specialises in highway and irrigation projects. The company had raised Rs 152 crore in its second round of funding from private equity firms and strategic investors including Lehman Brothers earlier this year. “We already got the promised amount of Rs 25 crore from Lehman about eight months back so we will not face any trouble,” confirmed director K Thanu Pillai.
However, the biggest beneficiary is K P Singh’s DLF Assets, India’s largest real estate company, which had a lumpsum deal of $200 million (Rs 921 crore) with Lehman Brothers and have already received their payments. DLF is slated to develop villas and township projects in Hydearabad. Many others like A Rami Reddy’s infrastructure and realty firm Ramky Group are playing safe, but for different reasons. Company spokesperson D R Patnaik revealed that a few months ago, Lehman had undertaken a due diligence process to pick up around 10 per cent in Ramky Group for $100 million (Rs 407 crore). “Midway through the discussions, we decided not to proceed with it, though we had not really anticipated this current crisis,” adds V V Rao, CFO, Ramky Group. Whatever be the reason the company is now sure it had taken the right decision. Not everyone has been that fortunate.
For instance Peninsula Land Ltd (PLL), the realty wing of the Mumbai-based Ashok Piramal Group (APG), which is building a seven million sq ft IT park in Hyderabad on a 30-acre land, might face the music if it does not receive the promised investment amount from Lehman which is due to come in the third quarter this year. Lehman Brothers had picked up a 40 per cent stake in this Rs 125 crore project promising to pump in nearly Rs 50 crore. However the only respite is that most of the money was raised from non-Lehman sources. Incidentally, PLL and Lehman had tied up in a Rs 700-crore joint venture earlier this year to invest in various realty projects, whereby Lehman took up 75 per cent stake. The Hyderabad deal was the first investment in this process.........
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