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IL&FS fund buys 30% in JB Pharma SEZ

IL&FS Realty Fund, a private equity fund managed by Infrastructure Leasing and Financial Services (IL&FS), has picked up 30% stake in JB Pharma SEZ for $15 million (Rs 75 crore). Two nationalised banks — State Bank of India (SBI) and State Bank of Mysore — have financed the Rs 84 crore debt to the special economic zone (SEZ) project.

JB Pharma SEZ has been formed to set up a pharma SEZ. It’s jointly promoted by the real estate firm HBS Realtors and JB Mody family — the promoters of JB Chemicals and Pharmaceuticals — at Panoli in Gujarat. Consulting firm Ernst & Young (E&Y) was the advisor to JB SEZ’s fund raising.

The total cost of the project is estimated at around Rs 160 crore. Confirming the development, Sandeep Shah, managing director, HBS Realtors, said, “The promoters have diluted 30% equity stake in the SEZ project to IL&FS Reality. Post-dilution, the promoters will hold 35% stake each in the project.”

IL&FS Realty is a real estate focused PE fund mandated to invest in equity or equity-related instruments of companies operating in the real estate sector and related areas. The fund seeks to achieve a gross investment-level leveraged annual internal rate of return in excess of 25%.

In addition, the fund will target a cash-on-cash stabilised yield on equity exceeding 8% per year for income-generating projects. JB Chemicals had signed a memorandum of understanding with the Gujarat government for the development and construction of the 312-acre SEZ in the state.

Later, the pharma firm roped in HBS Realtors as a JV partner in the project. HBS is one of the leading property developer in Mumbai. The company is a JV partner in many Phoenix Mills projects. “Good projects that are structured well should be able to raise funding despite the current market conditions,” Ranjan Kocherry, associate director, E&Y, said.

The intention is to make the SEZ a hub for manufacturing pharmaceutical finished formulations, active pharmaceutical ingredients and their intermediates as well as operate service activities related to research and development and contract manufacturing. Construction of the SEZ is expected to be completed by 2009.

The processing area of the SEZ will house 10-15 industrial units of both Indian and international companies from the pharmaceutical sector.

Source: Economic Times

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