Essel Financial Services streamlines realty fund business

Essel’s India Asset Growth Fund-Series I was conceived as the first in a series of real estate funds to be raised. Photo: Mint

Bangalore: Essel Financial Services Ltd, a part of Subhash Chandra’s Essel Group, has appointed its investment banking chief Abhinav Bhushan as the head of its real estate fund business that’s preparing to raise a $200 million offshore fund.

Essel Financial’s real estate fund business, which has been in operation for the past year, proposes to build a corpus of Rs.500 crore in 3-6 months.

“Currently, we have an up-and-running private equity real estate (PERE) fund where we have done investments worth over Rs.135 crore and have another Rs.45 crore deal in the pipeline. We expect to close this deal in the next one to two weeks,” managing director Amitabh Chaturvedi said in an email.

“In parallel, we have also applied for a licence from the Monetary Authority of Singapore for a $200 million offshore fund,” he added.

Essel Financial appointed Chaturvedi as its overall head in December. Amit Goenka, who was overseeing the real estate fund business, resigned in February.

Essel’s India Asset Growth Fund-Series I was conceived as the first in a series of real estate funds to be raised. Capital from this will be offered as last-mile funding to residential projects, largely in the form of debt financing.

Essel Financial has scrapped plans to launch a $100 million Shariah fund that it had announced earlier this year, Chaturvedi said.

Essel Financial Services was set up in 2012 for the media conglomerate to enter the private equity (PE) and investment banking business.

PE firms, while capitalizing on the increasing need for funds by developers, are cautious of the real estate sector and have focused on investing in residential projects as these have proved to be more reliable than office space developments.

Fundraising, however, has been difficult, particularly with global investors being wary of Indian real estate, especially with the sector generating mediocre returns on earlier investments.

“2014 will be another tough year to raise capital apart from established funds with impeccable credentials,” said Ambar Maheshwari, managing director, corporate finance, at property advisory Jones Lang LaSalle. “Offshore capital is difficult to come by and new funds will particularly find it difficult to meet fund-raising targets.”

With Bhushan being made the head of the real estate fund, Essel Financial is now scouting for a person to head Capstar Pvt. Ltd, its investment banking arm, which offers advisory services to companies on cross-border transactions.

“Our offerings would cover the entire range right from equity and debt capital markets, mergers and acquisitions to private equity syndication and debt and mezzanine financing,” Chaturvedi said.

Essel Financial’s non-banking finance company (NBFC) business, headed by chief executive officer Sandeep Wirkhare, focuses on small and medium enterprises (SME) financing with a deal size of up to Rs.75 lakh.

PRASHANT SHARMA

PGDM-IIsem

SOURCE-MINT