Private Equity Investments Turn to South India - MYREALITY.In, Real Estate, Share Market, Mutual Fund, Insurance
Trending
Powered by Blogger.
Wednesday, May 01, 2019

Private Equity Investments Turn to South India

Private Equity Investments Turn to South India

  Shobhit Agarwal, MD & CEO - ANAROCK Capital

  • Singapore’s top PE investors GIC, Ascendas, Xander largely eye southern cities of Bengaluru, Hyderabad and Chennai
  • Singapore funds, over 2 years, comprise 41% share of total PE inflows into Indian real estate at USD 3.5 bn (against USD 1.15 bn in 2015 and 2016 combined)
  • US and Canada-based PE investors come next with collective contribution of USD 3.8 bn PE funds in last 2 years

Singapore investors are betting big on Indian commercial real estate and other new sunshine sectors, including logistics and warehousing. Major Singapore-based private equity firms are funnelling billions of dollars into the country's real estate sector, particularly in South Indian cities.

As per ANAROCK's recent report Private Equity in Indian Real Estate, of the total USD 14.01 bn PE funds into Indian realty between 2015 to 2018, approx. 1/3rd were pumped in by Singapore-based firms alone during the period – the highest among both domestic and foreign investors. However, of the total PE inflow of USD 1.1 bn in Q1 2019, there were no investments from any of the Singapore-based PE investors such as GIC, Ascendas and Xander. 

With funding from banks and NBFCs drying up over the last few years, Indian developers were being forced to explore debt and equity funding from various private equity players. Singapore investors were on top of the list, followed by PE players from US and Canada. After establishing a strong base in China, India was their logical next destination of preference.

In fact, with their more patient and long-term outlook, Singapore-based investors and developers have gained a substantial foothold in India’s property market over the last four years. In in 2015 and 2016, Singapore-based PE players pumped USD 1.15 bn into Indian real estate. This saw a three-fold jump in 2017 and 2018 - to nearly USD 3.5 bn.

Major players including GIC, Ascendas-Singbridge and Xander have been making steady investments into India. However, in recent years they have scaled up their investments and developments across segments. Besides commercial spaces including office and retail, players like Ascendas are also diversifying their portfolios and eyeing sunshine sectors like logistics and warehousing.


Singapore-based Top PE Investors
Approx. PE Funds in India
USD (2015-2018)
GIC
2.5 bn
Ascendas
830 mn
Xander
910 mn
Source: ANAROCK Research

Investment inflows turn towards South India

Steady demand environment along with increased absorption of office space has prompted South region to gain momentum in 2018 with overall investments being tripled – from nearly USD 755 mn in 2017 to USD 2.24 bn in 2018.

Bangalore, Chennai and Hyderabad together comprised 54% overall share of PE inflows in 2018. While Mumbai in west continued to be the most preferred city for investments with 38% of the total capital inflow, Hyderabad witnessed a sudden burst in investments in 2018, contributing more than half of investments received by Southern India.

With regards to Singapore-based investors over the past four years, GIC has invested close to USD 2.5 bn in overall Indian real estate, mainly in cities like Mumbai, Chennai, Bangalore, Hyderabad and NCR. For Ascendas, the preferred cities have largely been Hyderabad, followed by Chennai and MMR.

While US-based investors, led by Blackstone, have largely invested in West Indian markets (including Mumbai and Pune), Singapore-based investors focused on strengthening their foothold in South Indian markets of Bangalore, Hyderabad and Chennai.

Chennai

As per ANAROCK data, Chennai saw total PE inflow of USD 1.7 bn in the last four years out of which Singapore-based investors alone pumped in approx. USD 930 mn.  Interestingly, Japanese conglomerate Mitsubishi Corp also invested nearly USD 25 mn in a residential project by Shriram Properties - Shriram Park 23 in Southern Chennai - in 2018. This equity investment marked Mitsubishi’s entry into the Indian real estate sector.

Hyderabad

Hyderabad saw a total PE inflow of nearly USD 1.5 bn over the last four years (2015-2018). Of this total, nearly USD 875 mn came from Singapore-based PE investors including Ascendas, Xander and GIC. Between 2017 and 2018, the overall PE funds from these companies touched over USD 750 mn. Out of all Singapore-based investors, Ascendas has shown maximum interest in Hyderabad, specifically in commercial real estate. GIC invested nearly USD 77 mn in 2015 in ICICI Venture’s Waverock project.

Increased office leasing activity in the last few years has positioned Hyderabad as one of the most active commercial markets in the South, backed by supportive Government policies and strong political stability. The city also offers the lowest office rentals in comparison to top Southern markets of Bangalore and Chennai. So far, in Q1 2019, Hyderabad saw an investment of around USD 44 mn by UAE-based company Lakeshore into the city’s retail.

Bangalore

Bangalore saw nearly USD 420 mn pumped into its real estate sector in 2018 across commercial, logistics & warehousing, and retail. This was a 112% increase against the total PE inflows in 2015 when it was merely USD 197 mn. Collectively, in the last four years the city has seen USD 1.13 bn inflow including new emerging sectors like student housing and also affordable housing. For instance, Wall Street giant Goldman Sachs invested nearly USD 44 mn in a student housing project of Yoho – the student living business of Manipal Education and Medical Group.
In Q1 2019, Bangalore saw inflow of USD 4 mn by Indospace group in Orris Infrastructure.

Top PE Deals in Hyderabad in 2018 by Singapore PE Investors
Investors
Investee
Amount
(USD Mn.)
Project-type
Xander
Phoenix Group
350
Commercial
1.13 mnAscendas
Phoenix Group
204
Commercial
Ascendas
Phoenix Group
198
Commercial
Source: ANAROCK Research
US-based investors pumped in nearly USD 4.0 bn in the same period (2015 to 2018) and more than USD 700 mn in the first three months of 2019. From the leading US-based private equity players including Blackstone, Goldman Sachs, Hines, Warburg Pincus and Proprium Capital, Blackstone alone infused nearly USD 2.9 bn across Indian cities over the last four years.
PE players from Canada, led by Brookefield, were the third-largest investors into Indian real estate over the last four years, with PE infusions close to USD 2.3 bn. The other major PE player active in India is Canada-based pension fund CPPIB.



Head – Media Relations

ANAROCK Property Consultants Pvt. Ltd.
Office No. - 901 A, 9th Floor, Onyx, next to Westin Hotel, Koregaon Park,
Pune, Maharashtra - 411001

+91 9657129999

Private Equity Investments Turn to South India Reviewed by Investment Guru on May 01, 2019 Rating: 5 Private Equity Investments Turn to South India   Shobhit Agarwal, MD & CEO - ANAROCK Capital Singapore’s top PE investors GIC,...

No comments: