Indian real estate giant plans PE fund

IL&FS, India’s largest private equity real estate business, has merged with real estate firm Saffron Asset Advisors. The firm plans to launch a real estate and a private equity fund.

IL&FS, the Bombay-listed alternative investment management business, has completed the takeover of Saffron Asset Advisors and its related assets, the firm announced today.

No purchase fee was disclosed but according to the announcement, shareholders of Saffron will be compensated via an issue of redeemable debentures. Funding will be provided using a mix of debt and equity.

The deal will see IL&FS, already India’s largest private equity real estate fund manager, increase its assets under management to $3.2 billion. Saffron managed more than $400 million of real estate assets prior to the takeover, which was agreed earlier this year.

IL&FS chief executive officer Archana Hingorani said: “This is a significant milestone in our ongoing strategy to diversify our asset base and investors and further consolidate our position as the largest Indian private equity fund manager.”

She added that following the merger, IL&FS would launch two funds, one for real estate and the other for private equity. According to India’s Business Standard newspaper, the combined fundraising target of the vehicles will be $800 million.

IL&FS manages private equity vehicles in real estate, private equity and infrastructure.

The merger with Saffron represents the first major consolidation in the sector which has been badly hit by poor fundraising efforts on the back of waning investor sentiment. Indeed, Saffron itself was one of a number of managers to shelve funds as a result.

This has led to a wave of speculation, particularly in India’s business press, about further consolidation. According to Indian news service DNA, Indiareit fund advisors is close to being sold to Religare Enteprises, the Indian financial services group and Sun-Apollo, the joint venture between Apollo Real Estate Advisors and Sun Group, is poised to be marketed for sale.