Kotak, Sun-Apollo buy stakes in Janapriya projects

At a time when equity and debt deals involving real estate companies are dwindling, realty-focused investment funds Kotak Realty Funds Group, or KRFG, and Sun-Apollo Ventures Llc. have bought stakes in two ventures of Janapriya Engineers Syndicate Ltd, a Hyderabad Real estate builder of affordable homes.KRFG, belonging to the Kotak Mahindra group, focuses on real estate investment opportunities with $800 million (Rs3,896 crore) of funds. Sun-Apollo is a joint venture between the Khemka business family and global real estate investor Apollo Real Estate Advisors with $630 million of funds. “Kotak Realty has picked up 50% holding in one of our special purpose vehicles Janapriya Projects coming up with an integrated township of 5 million sq. ft over 32 acres of land at Kapra in the outskirts of Hyderabad,” said K. Ravinder Reddy, chairman and managing director of Janapriya. Other deal terms were not disclosed. Construction at the Kapra project will begin in six months and will be completed over 36 months, resulting in an estimated valuation of around Rs1,000 crore on its completion, said Reddy. Janapriya has entered an arrangement with Kotak Realty, vesting the right of first refusal with the investor for equity stakes in new housing construction special purpose vehicles, or SPVs, of the Hyderabad firm with a cap of Rs350 crore on investment over the next five years, said Reddy.

Chaluvadi Srinivas, chief financial officer at the construction group, said it expects to announce two more township projects through SPVs in the next six months or so. Kotak Realty’s director of investments, Vikas Chimakurthy, said, his firm “found significant scope for growth in the low and medium housing construction sector”. A study by industry lobby Federation of Indian Chambers of Commerce and Industry and consulting firm Ernst and Young last month showed growing interest among real estate developers and private equity firms in affordable housing projects. Sun-Apollo has entered into an agreement with Janapriya to buy a majority holding in an SPV Janapriya Townships developing a township project at Madinaguda near Hyderabad’s new international airport at Shamshabad on the city’s outskirts. When contacted, a Sun-Apollo executive, who was involved in the Janapriya deal, confirmed its investment. This executive, who preferred anonymity, declined to reveal the terms.

Srinivas, Janapriya’s CFO, said Sun-Apollo had invested more than Rs75 crore for a more than 65% stake in the venture. The construction work on this project, with 1.5 million sq. ft of built-up area coming up over 14 acres of land, has begun and the project is expected to be completed over the next three months, said Janapriya executive director K. Kranti Kiran Reddy. “Though several private equity firms had shown keen interest in picking up stakes in the company at the enterprise level, we did not favour it since it involved significant transaction costs for transferring some of the unattractive lands and properties to other group companies,” he said. Janapriya, which has built 21,000 homes and at least 20 million sq. ft of residential and commercial spaces over the last two decades in Hyderabad and Bangalore, says it has a land bank of around 120 acres in the two cities valued at Rs656 crore. It also has an additional 100 acres of land in these two cities valued at around Rs537 crore under joint development agreements.