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Private Equity Funds Bullish On SEZs,Particularly Promoted by IT/ITeS And Real Estate Companies

By Nishant, Section Real Estate
Posted on Tue Aug 19, 2008 at 01:46:41 AM EST

Considering special economic zones as a good investment option, private equity (PE) firms are looking at infusing more funds into these projects, particularly SEZs promoted by IT/ITeS and real estate companies.
Recently, PE firms invested over $500 million in four such projects.

Some of the SEZs , which have already attracted PE funds include DLF, which received $400 million from US hedge fund DE Shaw in DLF Assets Private Ltd, and an IT park near Greater Noida that got $420 million from UK fund Trikona.

Besides, Trinity Capital Plc, a Trikona arm, is planning to invest around $75 million for a 49.4 per cent stake in Luxor Cyber City. The SEZ, to be developed at a cost of $400 million by Luxor and Trinity, spans over 63 acres and will cater to IT/ITeS companies.

Says Ravindra Sannareddy, CMD, Sri City, PE investors are drawn towards multi-product SEZs as they offer various investment opportunities.

The recently-launched Sri City, has also attracted PE investors who will hold 60 per cent in the project. The SEZ is being developed by Chennai-based Sri City Private Limited in Tada, Andhra Pradesh, with an initial investment of Rs 1,000 crore. By 2012-13, the total investment in the project would be Rs 17,500 crore, he informs.

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Citing reasons for this trend, a Mumbai-based private equity analyst feels real estate is a booming sector and valuations are slated to rise manifold.

"PE firms are looking for buying a minimum 10 per cent stake in SEZs being developed by real estate firms," he adds.

Meanwhile, a few domestic and international PE firms such as Goldman Sachs, Deutsche Bank, Blackstone, Lehman Brothers, Kshitij Real Estate Funds (a Pantaloon Group company) and HDFC Realty are said to be keen on buying stakes in SEZs.

According to Keshav Misra, head - real estate investments, Baring Equity India, his company is planning to invest $1 billion in India, of which a significant amount would go into SEZ projects.

Currently IT/ITeS SEZs are driving the demand since the Software Technology Parks of India (STPI) scheme is coming to an end in March 2010. IT/ITeS companies have now started setting up SEZs to avail of the tax benefits and other incentives, Misra says.

According to the Ministry of Commerce and Industry, investments in notified SEZs crossed Rs 50,000 crore last year. The ministry has projected the total investments to reach over Rs 2,85,000 crore in the notified SEZs by December 2009.

Source: Business-standard 19/Aug/2008

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