Small-ticket investments by private equity firms gaining traction

Private equity funds are tapping into everything from affordable housing projects to ancillary sectors aiding real estate and constructions.

Unlike big PE firms making large ticket investment, several PE firms are making small ticket investments anywhere between ₹10 crore and ₹60 crore using structures such as mezzanine funds and even non-convertible debentures on such projects.

“The real estate market is cyclical in nature and for the revival of the sector established players will look at alternate funding options through PE and NCD. Looking at the current levels, our aim is to provide strategic solutions to our clients more such deals are in the offing,” said Vaibhav Jain, President, Ashika Capital.

Ashika Capital had advised JV between Unique Builders and Keemaya Build to raise about ₹25 crore ($8 million) through non-convertible debentures. The funds were raised to facilitate a SRA project at Kandivali east in Mumbai.

A bulk of these funds are tapping the Mumbai, Delhi and Bengaluru residential markets. Players like Nisus Finance also invested in affordable housing with Shriram Land Development. Nisus Finance Services (NiFCO) is a start-up alternatives managers with a real estate-focused debt/mezzanine fund.

Shriram Land Development had raised ₹30 crore capital from investors of NiFCO to fund its residential projects at Anekal near Electronic City.

Amit Goenka, MD & CEO NiFCO, said: “This investment is in line with our strategy to back affordable housing projects that are customer focussed and promoted by credible groups.”

NiFCO has asset under management of $800 million. Other players like Indian arm of Red Ribbon Asset Management has partnered with Orbis Financial to raise capital for start-up projects. Red Ribbon promotes scalable projects that are incubated by investing its own capital in specifically chosen projects. The project is developed and made ‘finance ready’ by crossing key gestation milestones, which significantly reduces risk profile for the investor.

Red Ribbon intends to tap NRIs market seeking an opportunity to invest in Indian start-up space.

This apart, Red Ribbon has also incubated projects namely Modulex; a first full fit-out steel modular buildings and Eco Hotels; world’s first carbon neutral hotel brand. Red Ribbon plans to raise ₹60 crore collectively, for these two projects.

Jayakumar S Babu, CEO, Orbis, said: “The partnership will help us expand our services beyond the listed securities. Additionally, the customers will also benefit through safe, secure and transparent investment, making it a win-win situation for all the parties. “

Another fund Paragon Partners has launched $200 million India-focused mid-market PE fund.

The company through its funds Paragon Partners Growth Fund I plans to invest in 10-15 mid-market companies in India, with an average deal size of $10-20 million.

PPGF-I completed the funding of its first investment $10 million in Capacite Infraprojects Ltd. Capacite is engaged in the construction of buildings and factories, for developers, corporates and institutions.

Siddharth Parekh, Co-Founder, Paragon Partners, commenting on the first close, said: “The next decade in India will see a strong resurgence of growth in sectors such as manufacturing, financial services and infrastructure. Our aim is to become capital provider of choice in these sectors”.

In a recent report on PE investments, Cushman & Wakefield’s Sanjay Dutt said, “Domestic funds have continued to invest and focus primarily in residential asset class, as developers raised funds to meet their growing funding needs of working capital, construction financing and refinancing of loans. The investments are being made mostly at Special Purpose Vehicle (SPV) level, amidst slowdown in residential sales over the past two-three years.”