Eldeco Group Explores Private Equity Funding for Expansion
Delhi-based real estate developer Eldeco Group is engaging in discussions with AIG and Merrill Lynch to secure $200-250 million in funding from private equity investors. This strategic move follows an initial investment received from Xander PE. Eldeco Infrastructure & Properties (EIPL), a subsidiary of the Eldeco Group, aims to utilize these funds for upcoming projects in Ludhiana and Jalandhar (Punjab), as well as two undisclosed cities in Maharashtra. The financing strategy involves raising capital at both the entity level and through special purpose vehicles (SPVs) specifically designed for these ventures.
Funding Plans and Previous Strategies
Sources indicate that the company is exploring fundraising opportunities through four SPVs and potentially at the holding entity level as well. While the company declined to provide commentary on specific investor discussions and confirmed investments with Xander, Eldeco's CFO Mr. NK Ahuja acknowledged their ongoing efforts to secure funding by stating,
“We look at raising funds from time to time, but there is no need for us to comment on it”. This pursuit of private equity funding follows the abandonment of prior plans by The Eldeco real estate organization to merge its publicly listed entity, Eldeco Housing & Industries (EHIL), with EIPL. The initial strategy focused on subsequently raising capital through the capital market. EIPL, established in 2000, has experienced substantial growth, significantly outpacing the smaller, Lucknow-based EHIL. EIPL asserts developments exceeding Rs 3,500 crore across various real estate segments.
Market Dynamics and Investor Outlook
The move to secure private equity funding arises amidst analyses forecasting potential tightening of PE investments in key real estate areas, influenced by concerns about oversupply and a slowdown in transaction volume. This apprehension pertains to areas like the National Capital Region (NCR), Bangalore, Chennai, and Hyderabad, particularly within the commercial sector. However, contrasting perspectives suggest that there is a current surge in PE commitments towards Asian markets, including India, potentially outpacing previous investment levels seen in Europe. This influx of capital could offer a favorable environment for developers, particularly those focusing on tier II cities where market expectations for future growth are significant. Developers with projects in these emerging markets might find themselves strategically positioned to capitalize on the anticipated real estate expansion.