Nitesh Estates to raise Rs 700 cr

Nitesh Estates to raise Rs 700 cr
The Hindu Business Line, December 12, 2009, Page 3

To go the private equity route to fund Rs 1,350-cr Chennai project

Anjana Chandramouly, Bangalore

Real estate developer Nitesh Estates plans to raise about Rs 700 crore through the private equity route for its Chennai mixed-use development. This is in addition to the Rs 450 crore the company plans to raise by tapping the market.

Mr L. S. Vaidyanathan, Ex¬ecutive Director, Nitesh Estates, said, "We are looking at 1:1 debt-equity deal. We plan to raise Rs 700 crore of private equity for the Rs 1,350 crore Chennai project."

The company plans to dilute 74 per cent of its stake in the project, he told Business Line. The company was talking to a few private investors, "but nothing has been firmed up as yet," he added.

When launched, the Chennai Boat Club project would develop about one million sq ft of residential, commercial, retail and hospitality spaces. Nitesh Estates has signed a memorandum of understanding with Ritz-Carlton, said Mr Vaidyanathan.

The company, in fact, is developing the country's first Ritz-Carlton at Bangalore, which is expected to be ready by April 2011, he added.

The company has filed the Draft Red Herring Prospectus for its proposed initial public offering, through which it plans to raise Rs 450 crore with a greenshoe option for an additional about Rs 45 crore.

Mr Vaidyanathan said that stake dilution would largely "depend on market conditions", refusing to divulge any other details. The funds would be "used for our hospitality and retail projects, repay certain debts of the company and sign up new land parcels," he said. The company has development rights for about 20 million sq ft developable space in the next three- four years, he added.

As a company strategy, Nitesh Estates plans to have 80 per cent of its residential projects aimed at the mid-market, which is a deviation from its earlier upscale luxury business model. "The mid market (Rs 20 lakh to Rs 40 lakh) is where the demand is, and this is where a bulk of our projects would be focussed," said Mr Vaidyanathan.

In the next few months, the company plans to launch two mid-market projects in Bangalore, through which it plans to add over 1,100 units.

However, the company would stick to the upscale luxury model for its Goa project. Though there are land parcels identified for commercial development, the company would wait till "the market for commercial space picks up," he added. Next year, Nitesh Estates would have over three million sq ft under development, said Mr Vaidyanathan.

There are also plans to enter the Ahmedabad market, as "we have a land parcel being offered to us there: We are getting it evaluated and also studying the market to identify the kind of development to opt for," said Mr Vaidyanathan.