Wednesday, January 10, 2007

Pallonji may sell stake in realty

Reeba Zachariah
Times Of India article

MUMBAI: Things are changing at Shapoorji Pallonji Centre, the business headquarters of India's fifth richest billionaire, Pallonji Mistry. The legendarily reclusive septuagenarian, well-known as the single largest shareholder of Tata Sons, promoter of India's largest industrial house — the Tata group — is now constructing a deal at group flagship Shapoorji Pallonji & Company, which could see the Mistry family adding billions more to its swelling coffers. With the Indian real estate sector attracting huge investments from foreigners, can the 140-year-old builder be left behind?

It is learnt that foreign investors are wooing the Mistrys to become a part of their real estate venture. A source familiar with the situation told TOI that the Mistrys are not bringing in any investor in Shapoorji Pallonji & Company but planning to sell a part of their stake in real estate business. SP&Co has two business units: construction and real estate.

The source said SP&Co is the holding company of the group which also holds shares of Tata Sons, and any stake sale in the company is being ruled out. Instead, the group is contemplating whether to rope in a foreign investor for a single real estate development project or form a JV for a pool of projects that it could hive off into a separate entity. The JV would be majority owned by the SP group while the foreign investor would get between 15% and 20%. The group has about 50 million square feet of real estate for development spread across Pune, Chennai, Kolkata, Mysore and Gurgaon among others. SP&Co will soon be launching a 60-storey residential tower in Mumbai, said to be the tallest in India.

A source said that the group preferred government-owned funds such as Dubai Capital, Abu Dhabi Investment Authority (ADIA) and Government of Singapore Investment Corporation (GIC), all of which are in talks with it. The valuation of the deal could not be ascertained as the source said the process has just started.

"Land bank is the most important factor as property is about location. If location is good and the land bank has
been substantially acquired at prices well below current levels, developers will attract a very good response," says Siddhartha Gupta, real estate analyst with Macquarie Research.

The real estate sector has become a hot pick for investors, attracting $2.08 billion — about 26% of the total foreign direct investment of $8 billion in the country in 2006. Buoyed by demand from home buyers, retailers and special economic zones, the property boom is expected to continue.

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