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Shapoorji floats $500m PE fund

Shapoorji floats logoThe Shapoorji Pallonji Group has floated a $500 million private equity fund, mainly focused on real estate, marking its return to the financial services industry.
One of the country’s richest and low-profile business conglomerates will be joining the growing list of Indian corporates such as the Tatas, the Aditya Birla Group and the Anil Dhirubhai Ambani Group in the private equity play with its Mauritiusregistered fund, STREF.
Shapoorji Pallonji Investment Managers, which will be managing this fund, will shortly announce the first close of $250 million and start investing thereafter, said a senior official at SP Centre, the group’s South Mumbai headquarters. The fund manager has narrowed down on a few initial investments, which could include buying minority interest in a pharmaceutical and healthcare special economic zone down South
Shapoorji floats Shapoorji Pallonji (SP) —best known for being the single largest shareholder (18%) in Tata Sons Ltd—competes with the Tata Group in several areas ranging from housing to water purifiers, the latest being private equity. Tata Sons is the holding company of the $72 billion salt-to-software Tata Group.
India’s private equity sector saw investments totaling over $8 billion in 2010, almost doubling from the previous year. International investors (Limited Partners) behind private equity funds have been keen on parking capital with those focused on China, India and Brazil. But the Limited Partners have also been wary about the quality of investment managers at the helm of these funds, as returns from India are below expectations till date. In context, the entry of pedigree corporate houses like Shapoorji Pallonji—spearheaded by the Irish-Parsi billionaire Pallonji Mistry—is significant.
The fund will invest part of its corpus in the development projects of SP Group, which has considerable land banks across the country. But at least sixty percent of the investments will be in external projects. “If there are good projects within the group we will look at them. The focus, however, will be on external projects,” the source, mentioned earlier, added.
SP has been working on the private equity concept for sometime with the process gaining momentum in recent quarters. The group had earlier explored a joint venture with foreign financial services behemoths but the global meltdown played spoilsport. It had preliminary talks with AIG at the time. Last year, the group inducted Rajesh Agarwal, the former head of AIG real estate fund, to spearhead the private equity foray.
In the past, Shapoorji Pallonji dabbled in financial services through a nonbanking finance company, which focused on vehicle loans. However, this venture was scaled down and now operates only as an inhouse advisory to the group.

Source: April 27, 2011, TNN