IDFC Alternatives unveils two real estate funds

Rajesh Kurup
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M.K. Sinha, CEO, IDFC Alternatives Ltd
BL M.K. Sinha, CEO, IDFC Alternatives Ltd

The firm expects to announce the first close in the next 45 days and the final close in the next 3-4 months.

Sensing a healthy appetite from the real estate industry, IDFC Alternatives, the private equity arm of infrastructure finance company IDFC Ltd, is raising two funds for the sector. The firm is raising a domestic mezzanine debt fund of about $100 million (₹620 crore) and a foreign rental yield fund of $300 million (₹1,860 crore).

“There is enough demand in the market as all the real estate developers are looking for money. We are looking to raise a modest number and if we get to a $100 million number, we would be happy,” M.K. Sinha, Managing Partner and Chief Executive Officer of IDFC Alternatives said, talking about the domestic fund. The firm expects to announce the first close in the next 45 days and the final close in the next three to four months. It intends to raise the proceeds from domestic investors, such as family offices and high networth individuals and invest in real estate projects across the seven Indian major cities, including the metros.

It has also received some commitments, Sinha said, but did not divulge further details.

IDFC Alternatives is also raising a foreign rental yield fund of “maybe $300 million” and expects to tie up funds by July. This would be a foreign joint venture club-structure rental yield fund, for which the PE firm is in talks with “strategic players.”

The exit modes would be through Real Estate Investment Trusts or strategic sale of buildings, Sinha added.

The firm, which was started in 2002 with a $200-million fund, now has close to $3 billion of assets under management across infrastructure, private equity and real estate.

“We are now transitioning to what we call a multi-asset class, alternatives platform. We will conceive and float funds in other asset classes. I can’t reveal them now,” Sinha added.

$1-b fund

IDFC Alternatives, which had received commitments of $644 million for its second infrastructure fund, expects to announce the final close in the next three to four months.

The PE firm is targeting a corpus of $1 billion, and when closed, this would be the biggest infrastructure fund. It would invest in roads, ports, airports and power, among others.

The company, which had wound up its PE Fund I in December 2013, has two other PE funds (Fund II of ₹1,858 crore and Fund III of ₹2,903 crore).

“Over the next six months to a year, we will focus on harvesting (exits) and value creation in our portfolio before we think of launching our private equity fund IV,” Sinha added.

(This article was published on January 27, 2014)
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