On Wednesday, the real estate company Housing Development & Infrastructure (HDIL) disclosed that private equity giant DE Shaw is investing $250 million in Mack Star Marketing, which operates under the HDIL umbrella. Mack Star Marketing possesses the development rights for a vast commercial complex being erected in the bustling locality of Andheri. Notably, one week prior, HDIL transferred its development rights for this sizeable project to Mack Star, with the transaction valued at Rs 900 crore.
This investment from DE Shaw will be made through a combination of equity and debt. HDIL's managing director, Sarang Wadhawan, mentioned that while DE Shaw will acquire a minority stake in Mack Star, he did not disclose specific details regarding the equity structure.
This financial move happens at a particularly tumultuous moment for India's capital and real estate markets, which have faced significant challenges. The dramatic decline witnessed in January, alongside the withdrawal of Emaar MGF’s IPO in February, has sent shockwaves through real estate companies that depend heavily on equity for funding their growth initiatives.
Once coveted, private equity (PE) funding has turned attractive during these times; however, capital sources are now more discerning, compelling companies to present realistic valuations.
According to a leading consultant, PE investments in the real estate sector have plummeted by about 25-30% over the past year on a volume basis. Investment bankers confirmed that both real estate and private equity funds are exercising selectivity, with all funds rigorously evaluating the most promising projects.
Wadhawan remarked, "Compared to other cities, the real estate landscape in Mumbai holds a different narrative due to the substantial demand-supply discrepancy in the financial capital. Real estate funds and private equity firms find it appealing to partner with projects in Mumbai." As a result of these developments, HDIL's shares showed an increase of 2.3%, closing at Rs 855.70 on the Bombay Stock Exchange.
Additionally, HDIL recently engaged in a sale of development agreement regarding its project named Kaledonia, located on Sahar Road in Andheri (East), which was undertaken with Mack Star Marketing for a notable sum of Rs 900 crore.
A prominent player in the real estate sector, HDIL operates extensively within the Mumbai Metropolitan Region and is affiliated with the Wadhawan Group, a well-established entity in real estate development for nearly three decades. Recently, the company was awarded a slum rehabilitation project of the Mumbai International Airport Limited (MIAL), aimed at rehabilitating slums in the vicinity of Mumbai’s airport, covering an expansive area of 276 acres.
Furthermore, HDIL has been shortlisted by the state government for potential bidding on the prestigious Dharavi Slum Rehabilitation Project, demonstrating its active involvement in various endeavors. Additionally, the company is currently executing a variety of commercial, residential, and retail projects across the Indian landscape.