Singapore deal may boost Indian market

Singapore deal may boost Indian market
By Joe Leahy, Financial Times



Mumbai: An investment in a mid-cap Indian property company by a Singapore-led investor group could rejuvenate a sector struggling with rising interest rates and falling stock market valuations.

The investment by the Government Investment Corporation-led group into Anant Raj of about $180 million, including a greenshoe option, could lead to similar deals by foreign investors in other real estate stocks, bankers said.

Appetite

"There's a lot of appetite. You'll see more of these one-on-one deals," said a banker familiar with the transaction.

Once barely present on equity markets, Indian real estate companies have held a spate of listings since last year, taking advantage of a huge spike in property prices and increased interest from foreign institutional investors.

But the attempt to establish the real estate sector on the market has stumbled after the proposed benchmark listing for the industry, the $2 billion-$2.5 billion initial public offering of DLF, one of India's largest developers, was delayed last year. It is still awaiting its IPO.

Up to now, only relatively small or mid-sized property stocks have listed, often at ambitious valuations. Prices fell, especially after the central bank started increasing interest rates in December to tame inflation and the market regulator tightened disclosure regulations for real estate companies.

Most stocks have since rebounded but are still well off their highs. A recent listing, Parsvnath Developers, at Rs326.30 a share, is barely above its IPO price of Rs300, in spite of record rises in the overall market.

Faltering

Akruti Nirman, which specialises in slum redevelopment, is at Rs371.75 after listing at Rs540. Sobha Developers has recovered to Rs886.85, higher than an IPO price of Rs640, but still down on a high of Rs1,248.

Anant Raj has been listed for a longer period of time and has generally outperformed the index over the past six months, but it is also off its highs.

Under the GIC deal, Anant Raj will sell Rs6.84 billion ($167 million) in shares, of which the Singapore firm will buy Rs4.3 billion, Morgan Stanley Dean Witter Mauritius Rs1.7 billion and the Quantum (M) fund Rs836 million.

The deal will give GIC an 8.5 per cent stake in the company and a right of first refusal to invest in projects proposed by Ananta Raj.

"It's great for the sector that these mid-sized players get someone with deep pockets behind them," said the person familiar with the deal.

Large foreign investors such as the GIC or private equity firms could bring international practices to smaller Indian property firms, many of which have only recently introduced modern corporate structures.

UBS advised on the deal.