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Puravankara in talks with PE firms for funds

Real estate firm Puravankara Projects is in talks to sell stakes in some projects, to fund expansion in a booming market where it sees annual growth rates of 30-40 percent, a top official said on Monday.

Earlier in the day the Economic Times reported that the Bangalore-based firm plans to raise up to 20 billion rupees through stake sales in five real estate projects.

“We have been cognizant that Puravankara maintains a strong balance sheet. This enables us to embark on our strong growth plans,” Ravi Ramu, director and chief financial officer, told Reuters in an interview.

“Until the deal is closed we cannot specifically comment. But private equity is definitely a source we are looking at actively,” he said, adding that stake sale will be only at project-level and there will be no dilution of the parent company's equity.

Recent projects lined up by the company involve an investment of 9 billion rupees each in a Kochi residential project and a residential-cum-commercial project in Hyderabad, 5 billion rupees in a Chennai project and 3 billion rupees in Coimbatore.

The company is also foraying into eastern India with a 4 billion rupees joint-venture project in Kolkata, and also neighbouring Sri Lanka with an investment of about 1.8 billion rupees for a luxury villas project near Colombo, Ramu said.

“We are well placed for construction finance because of our strong relationships. We are also looking at debentures and commercial paper as an important fund source,” he said.

Puravankara has planned an investment of 10 billion rupees for setting up 5-6 luxury and five-star hotels in south India, and is in talks with several hotel chains for operating these, he said. 

Puravankara expects its cheap land acquisitions and in-house construction to help maintain strong margins for years to come.

For the quarter ended December 2007, the developer posted a 122 percent rise in net profit to 631 million rupees, with net profit margin of 42 percent. Ramu said margins are likely to remain in mid-to-late 30s for many quarters.

The company does its own construction, which saves 12-15 percent of costs and gives it more operational control on projects. Besides, with developable area of nearly 125 million sq. ft., it holds a huge cost advantage, Ramu said.

“We have been careful in buying land, it is very well located. This will hold us in stead for at least 7-8 years,” he said.

Purvankara has avoided projects in western and northern India because steep land prices make projects unaffordable, but is instead getting into areas not yet fully exploited by developers.

“We are launching in Kolkata. We also have projects in smaller cities like Mysore, Coimbatore and Kochi, where NRI (non-resident Indian) demand is picking up,” he said.

Puravankara shares, which touched a high of 375 rupees earlier in the session, ended at 361.15 rupees, up 13.9 percent in a strong Mumbai market.

Source: Reuters

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