PUNE: The Mauritius-based Madison India Real Estate Fund's private equity arm, Paracor Capital Advisors has invested Rs. 55 crore for an 8% stake in in Marvel Landmarks, a Pune-based realty company. Marvel Landmarks is the FDI-compliant company of local developer, Marvel Realtors and accounts for 30% of the Marvel Group's total assets.
Vishwajit Jhavar, CEO, Marvel Realtors, said this is the second time Marvel Landmarks has received overseas investment. In 2007, it received investment from Och-Ziff Capital Management Group LLC, a US-based hedge fund and large institutional alternative asset manager. In addition, Och-Ziff had committed investment in two projects so its total investment with the Marvel group was Rs. 290 crore. In this round of investment, too, the Indian developer has a commitment from the Mauritius investor for investments into two more projects. Jhavar indicated that Paracor would pump in another Rs. 150 crore, over and above the equity investment.
"Och-Ziff invested Rs. 60 crore and got a 49% stake in Marvel Landmarks, valuing the start up at Rs. 120 crore. Now, Paracor has invested Rs. 55 crore for an 8% stake, valuing the company at Rs. 610 crore, a five-fold jump," Jhavar said. He added, "The share holding in Marvel Landmarks is now 70% with the promoters, 8% with Paracor and 22% with Och-Ziff. We had call options with Och-Ziff which we have been exercising and in a couple of months when the last tranche is paid, their stake will reduce to 22%."
The current round of investment will allow Marvel to set up its own pre-cast factory and to buy construction machinery. "We need to speed up construction since we will have to deliver 3-4 million sq ft per annum for the next few years, 40% of which will be Marvel Landmarks," Jhavar said.
Paracor Capital Advisors, the private equity focused entity which advised Madison India Real Estate Fund Limited, invests in India's emerging real estate market while Madison IREF invests in hospitality and real estate projects. Investors in the Madison India REF are high net worth individuals from the UK, the US and Australia. According to Paracor's website, it usually invests between US $5-10 million in a project and takes a stake of 26-49%.
Jhavar said they prefer to go for equity funds since debt is not an option. "The pure equity investment means that the investor gets returns while sharing some of the risks of the developer." In the case of Och-Ziff, returns have been five-fold, given the increase in the valuations over the three year period.