ICICI Prudential Real Estate Scheme-1

VENTURE CAPITAL:

This venture Capital is managed by ICICI Prudential Assets Management Company Ltd

FUND DETAILS:
Fund Size	Rs 500 Crore with additional Rs 500 Cr Optional
Target Return	NOT PROVIDED. However, Gross IRR of 22%-27% Expected as another fund managed by them already yielded in this range
Hurdle Rate	10% Pre-Tax
Min Invest.	Individual: INR 30 Lac Insti. Investor: INR 50 Lac
Initial Draw Down	30% of the fund
Draw Down	1+ 1 Year after final closing in two tranches- 30% & 40%
Management Fee	2%
Performance Fee Ratio	10% with 100% catch up
Upfront Cost/ Set up Fee	2%, if Invest. > Rs 50 Lac 2.5%, if Invest. < Rs 50 Lac
Investment Horizon	Long Term- Min 4 Yrs (Max 6 Yrs)

FUND FACTS:

•  The objective of this venture Capital is “Structured/ High yield financing in real estate aiming for superior risk-adjusted returns.
• Contemplated investment in top 7 cities of India- Mumbai Metropolitan Region (MMR), NCR, Bangalore, Chennai, Hyderabad, Pune and Kolkata.
• Investment Preference for under construction residential projects with visibility of cash flows- Mainly with start-up companies/ projects.
• Dedicated team with Average Experience of approx 20 Years and active support of ICICI Bank.

INVESTMENT HYPOTHESIS:

• Restrictive financing options available to developers provide opportunity for better returns.
• Regulatory hurdles: RBI regulations restrict bank financing for land acquisition; developers forced to use internal reserves and private market Borrowings.
• Muted bank lending: Banking sector’s exposure towards commercial real estate lending in India reduced from 23.2% in June 2011 to 4% in June 2012.
• Lower realizations: Slowdown in unit absorption forcing developers to give steep discounts for projects under construction.

INVESTMENT RESTRICTIONS:

• Not more than 25% Fund exposure in any city other than Mumbai Metropolitan Region (MMR) and National Capital Region (NCR)
• Not more than 25% Fund exposure in a single deal
• Up to 70% or higher investment in structured / high yield transactions, up to 30% investment in deals with equity kicker

 

VENTURE CAPITAL ANALYSIS:

The Venture Capital Fund is expected to invest in real estate in 7 cities/ municipal region on project basis with reputed developers.  They are focusing on initial project finance i.e. for new land acquisition/ starved start-up projects. Investment managers are expecting that the restriction, to not finance developers for land acquisition/ initial project start-ups, imposed by RBI on banks and slowdown in unit absorption create opportunities for participation with reputed developers in well located projects.

AS per ‘Master Circular On Housing Finance’ dated July 1, 2011, banks are not permitted to extend fund based or non-fund based facilities to private builders for acquisition of land even as part of a housing project. This is a major concern for developers to start new projects or to continue soft lunched projects and developers has already started looking for other sources of funds. This is has created a very big opportunities for Venture Capitals and especially to those who are backed by a very big financial institutions/ Banks like ICICI Bank in this case.

This is a long term fund having investment horizon of 4 (+1+1) i.e. Max 6 years after final closing. Fund manager has not set target return but their previous assignments have yielded gross IRR of approx 22-27% which they may achieve considering market condition.

RISK: Venture Capital is a closed ended fund and there is no direct exit option.

Emerging India Fund

FUND FACTS:• Emerging India Fund (EIF) is an India-focused, sector agnostic Venture Capital Fund.• "IDBI Trusteeship Services Limited" is the trustee of Emerging India Fund.


• Emerging India is managed by ICICI Investment Management Company Limited (IIMCL), a 100% subsidiary of ICICI Bank.
• ICICI Group has nationwide presence across the financial spectrum. The parent company ‘ICICI Bank’ is recognized as top bank for innovations in SME Banking by International Financial Corporation.
• ICICI Group has committed to invest 10% of the total fund corpus (maximum of USD 15 million).


INVESTMENT STRATEGY:
Fund may focus on following sectors: Healthcare, Education, Consumer led Industries, Infrastructure, Power Projects, Logistics, IT & ITES and Outsourcing. Fund will invest in any sector/ corporate as per Growth Drivers Recognized. The Growth indicators are:
• Increasing Consumer Power creating demand for new business.
• Govt.’s focus on Infrastructure, creating opportunities for ancillary infrastructure players. • Emerging Sectors like Logistics, IT and Outsourcing.


GROUP’S PAST PE FUND EXPERIENCE:
ICICI Venture (subsidiary of ICICI Bank) is one of the largest and most successful private equity firms in India with funds under management to the tune of USD 2 billion through India Advantage Fund. ICICI Venture has exposure in almost every sector.
The investment Portfolio of India Advantage Fund includes Samtel Color, TV Today(Aaj Tak), Karvy Stock Broking Ltd, Pantaloon Retails, Welspun India, Centurion Bank of Punjab, Nagarjuna Construction, Naukri.com etc.


FUND ANALYSIS:
Presently PE Funds are focusing on sectors like infrastructure, HealthCare, Education etc. Recently Reliance Private Equity Fund I has invested Rs 120 Crore in Pathways World School.

EIF is promoted by ICICI Group, which has vast experience in project financing/ SMEs financing, is the main advantage of the fund. 10% to 15% of the total fund will be contributed by ICICI Group which shows the seriouness of the group to build faith in the prospective capital contributors. The moderate to high return is expected.The fund can be subscribed.RISK INVOLVE: VC Fund Invest in rapidly growing companies that require a lot of capital or start-up companies. Hold more risk.


FUND DETAILS:
Fund Size: Initial: USD 100 Million
Green Shoe- USD 50 Million
Target Return: 25% IRR per annum
Hurdle Rate: 10% per annum
Min Invest.: Individual=Rs 50 Lac, Domestic Institutional Investors= Rs 5 Crore
Draw Down: 20% at the time of agreement and rest on call.
Management Fee: 2% p.a. of capital commitment/ effective corpus.
Upfront Cost: Upto 2% of the aggregate committed
CARRY: 20% with catch up
Investment Horizon: 7Years
Extension- 1+1 years
Commitment Period: 3 Years from date of final closing

MANAGEMENT TEAM:
Fund will be managed by ICICI Investment Management Company Limited (IIMCL). Mr Vikas Agarwal, Chief investment Officer having 15 years of experience is heading the investment team of 8 experts.


LEGAL COUNSEL: Amarchand & Mangaldas and Suresh A. Shroff  & Company

Aditya Birla Real Estate Fund

This is a Venture Capital Fund
 
FUND DETAILS:Fund Size: Initial: Rs 750 Crs., Green Shoe Option: Upto Rs 250 Crs
Target Return: Not Available
Hurdle Rate: 10% IRR per annum
Min Investment: Individual: Rs 25 Lakh; Corporate/ Insti. Investor: Rs. 10 Crs
Draw Down: 20% (Notice period is 15 Days)
Management Fee: 3%, One time charge, 2% p.a. of total commitment amount.
CARRY: 80:20 ratio (Investor : Investment Manager)
Investment Horizon: 6Years Extension- 1+1 years
Investment Tenure: 3 Years from date of final closing
 
TAXATION: Fund Income would be in the nature of dividends, interest income and capital gains at the time of the sale of investment. Interest income arising from portfolio companies or on short-term investments by fund would be taxed at the maximum marginal rate.
Tax Counsel- KPMG India Pvt Ltd
 
INVESTMENT MANAGER:Fund will be managed by Birla Sun Life Asset Mgt. Company Ltd
Advisory Team:
1. Mr Shashi Kumar, Head Real Estate having 20 years of experience.
2. Mr Jagannath Shetty, CFO having 20 Years of Experience.
3. Mr Shekhar Rangaraj, Head Business Development, more than 20 Years of experience.
 
 
LEGAL COUNSEL: Nishith Desai Associates
 
CUSTODIAN: Deutsche Bank AG
 

· Aditya Birla Real Estate Fund is registered with SEBI as Venture Capital Fund. Fund will be managed by Birla Sun Life Asset Mgt. Company Ltd.
· Fund plans to make investments in unlisted (some times in listed also) real estate firms through equity, equity-related and debt instruments.
· Fund will focus on residential projects and will mainly look at deals at project level, but may also look at investments at an enterprise level in privately held companies.
· Aditya Birla Group is regarded for its corporate governance & experience in infrastructure sector in India.
· Aditya Birla Group’s Aditya Birla Private Equity- Fund I successfully raised Rs 675 Crore from domestic market at the time of First Closure recently.
 
INVESTMENT STRATEGY:· The fund proposed to invest in realty and realty related business in west & south India.
· Main Focus on Residential Realty.
· Investment at “Land Cost” Stage with well performer developers.
· Single Project Exposure should not increase 25%. Single Group Exposure should not increase 40%. Similarly they have set limit for Single City, Metro Exposure etc.
 
OTHER SIMILAR FUNDS:
· HDFC Property Fund- HDFC India Real Estate Fund (HI-REF)
· DHFL Venture Capital Fund - promoted by Dewan Housing
· Kotak Mahindra Realty Fund
· Kshitij Venture Capital Fund - a group venture of Pantaloon Retail India Ltd
· India Advantage Fund- promoted by ICICI Bank
 
GROUP’S PRIOR EXPERIENCE IN PRIVATE EQUITY:
Aditya Birla Private Equity- Fund I Portfolio:
· Anupam Industries Ltd, Rs 50 Crs in February, (a Gujarat-based makers of material handling equipment).
· Bombay Stock Exchange (BSE), Rs 21 Crs
 
FUND ANALYSIS AND RECOMMENDATION:Due to economic slow down, the price of properties has dropped significantly. Now the world economies are on recovery path. The people who deferred their purchases are now actively scouting for homes in both low and high cost segment. The builders have also well responded- Tata homes has sold recently premier class flats for more than Rs 4 Crs per unit after selling low cost nano homes in Mumbai suburb.
 
This fund will invest in west and south India like Mumbai, Pune, Hyderabad, and Bengaluru cities where either the demand is slightly more than supply or at least equal. Also, the fund will enter at Land Cost Stage and as per news in the market will probably exit after booking of the project but before final construction and hand over to the customer. The Fund has not disclosed its Target Return but expected to perform well.
 
On the basis of above discussion and Aditya Birla Group’s past experience in PE, Investor may invest in this Fund. However, the investment commitment size should not be too high as investment in the Venture Capital Fund hold more risk.FUND FACTS:· AUDITORS: S.R. Batliboi & Co.