Sobha Developers gets investment SPV Level; Plans rights issue

Just a few days back, I had mentioned why PE investors prefer to invest at SPV level (Read here) and how real estate developers are really crunched for cash. They are getting funding at over 25-30% from non traditional sources such as moneylenders and personal investors. Banks have restricted their lending to Real estate players as per the guidelines of RBI and these developers are sitting on a heap of land which leads to high holding cost.

However, as SPV is the preferred route for PE funds, Sobha Developers is planning to dilute minority stake at Special purpose vehicle level to private equity investors for 3 projects in Bangalore, Pune and Gurgaon to raise funds. Sobha is planning to come out with a rights issue and then dilute its stake in 3 projects. Sources familiar with the development said Sobha is in talks with at least three investors, including Dubai-based Pan Atlantic, which recently invested $10 million into Sobha’s residential project in Bangalore.

However, it is to be noted that most of these investments are not pure equity but have a structured debt element.

Sobha is issuing shares on a rights basis to raise about Rs 350 crore. Enam Securities is the lead manager to the issue. The realtor is expected to raise this money by the end of October.