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INDIA BUSINESS WORLD - NOVEMBER 1st – NOVEMBER 15th 2008
OMAXE PROMOTER BUYS OUT CO'S STAKE IN ARM
REAL estate prices are unlikely to see the heady levels of late 2007 and early 2008, anytime soon. That could explain why more promoters are getting serious about tapping opportunities in the affordable housing segment. Rohtas Goel, chairman of Delhibased real estate company, Omaxe, has bought out the company's 51% stake in National Affordable Housing and Infrastructure (NAFIL), the affordable housing subsidiary of Omaxe.
This purchase of 2,550 equity shares of Rs 100 each could easily pass off as an insignificant transaction as the amount involved is just a paltry Rs 600,000 paid by Mr Goel. The fact that NAFIL existed only on paper with no revenues on its books makes the transaction all the more intriguing.
When asked for the reason behind this move Mr Goel said: "The high profile independent directors did not want Omaxe to bear the administrative expenses of a non-performing company, so we thought of divesting its stake in NAFIL to promoter group firms. And since I believed in this business model, I volunteered to buy Omaxe's stake in NAFIL."
Omaxe had proposed an Rs 80,000-crore investment in NAFIL, when the company was formed in May this year. This was to develop 10 lakh affordable homes in the next five years. Affordable housing is the segment that has been in demand despite the downturn in the real estate market. Going ahead, this would be a good business opportunity, both for the investor as well as for the developer. Probably this prompted Mr Goel to increase his stake in NAFIL. Once NAFIL starts generating revenues, Mr Goel's stake would be worth manifold the value he paid to purchase it.
Omaxe would have the first right of refusal. Still, if it were to pick up stake in the fully operational NAFIL at some point of time, Goel's flagship firm would have to shell out a far higher valuation.
Affordable housing has been attracting interest both from private equity guys as well as developers. As this segment has seen the maximum demand potential in the near future, it has attracted a lot of other developers as well.
South-based developer Puravankara floated a subsidiary, Provident, for its affordable housing segment. Private equity firm Red Fort Capital (RFC) plans to invest Rs 430 crore over the next two years in affordable housing on the outskirts of Bangalore and Hyderabad. Global private equity fund Warburg Pincus recently announced an investment of Rs 300 crore in Jaipur-based Mannat Group company, Unique Affordable Homes, for projects in north and west India.
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