It has come to the knowledge that HDFC Property Ventures and Temasek are holding series of discussions regarding the investment of Rs. 625 crore ($130 million) in the Bangalore-headquartered Prestige Group. The reasons are not hard to see. A number of cash-hungry real estate companies continue to tap private equity funds in order to satisfy critical funding requirements.
As indicated by sources, HDFC’s real estate fund along with Singapore’s Temasek are in discussions with Prestige and it is looking for a valuation of $1 billion for its business. However the deal could take some time to fructify seeing that both sides need to smooth over a number of issues, including pricing. “Pricing of the deal remains a hiccup even as talks are very active,” one source added.
On the other hand, it has been learnt, that the Prestige Estates is on the lookout for a valuation of about $1 billion. It is not clear if Temasek and HDFC are enthusiastic to perform a transaction at that price. They may consider something between $800 million and just under $1 billion.
The two funds may jointly pick up a little over 15% stake in Prestige Estates Projects, valuing the holding entity of the southern real estate major anywhere between $800 million and $1 billion, the people mentioned earlier added. “Pricing is the only issue left between the company and these funds. The company is also keeping the option of hitting the IPO market for raising funds,” said one official close to the transaction.
It is to be noted that the most up-to-date discussions follow a $100-million mezzanine financing deal with Hong Kong-based Forum Partners that failed to acquire regulatory clearances. ezzanine financing provides companies a way to garner funds without going public and potentially giving up ownership.
Temasek, which is a limited partner (LP) in HDFC’s real estate fund, has the option to co-invest with the housing financing major whenever an opportunity arises. The ratio could vary, but in this case the partners are looking at something in the region of 60:40 with HDFC being the senior partner.
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