Hotel buyers sniff a chance to rake it in

This story first appeared in DNA Money edition on Tuesday, December 20, 2011.

The fairly quick rebound following the economic downturn in 2008-09 had upset all calculations for hospitality asset buyers, who now have a reason to rejoice. A looming double-dip recession means 2012-13 is likely to open another window of opportunity for them to make a killing.

Real estate consultants - both domestic and international - and individual brokers these days are working overtime on mandates involving buying and selling of hotel projects. While the phenomenon, experts said, is quite evident in key metros, the level of activity is quite similar in non-metros as well. And as the sector has already witnessed a handful of deals being concluded in the recent past, there is a feeling that the momentum will pick up in the coming year.

“There is some degree of stress in the market for sure, especially with land parcels and incomplete structures. As for sale of operational hotels is concerned, it is largely in the case of companies with heavily leveraged balance sheets,” said an industry expert.

Companies with high debt on books and those struggling to access capital to start or complete work on their respective projects are taking to divestment seriously. Besides, the not-so-exciting economic environment, which is likely to impact hospitality, travel and tourism sectors in the coming year, has only added to the urgency in sales.

Among hotel assets already in the market for sale are those from leading realty firms like DLF Hotel Holdings, a subsidiary of DLF Ltd, and DB Hospitality, a part of DB Realty. According to sources, there are assets also from companies like Bangalore-based Royal Orchid Hotels (ROHL) and Indore-based mixed-used developer Entertainment World Developers Pvt (EWDPL) which are understood to be seeking buyers for some of their projects.

Similarly, another BSE-listed hotel company Kamat Hotels India (KHIL) is in the process of divesting four of its hotel land parcels - ranging from 2 acres to 40 acres -in cities like Coimbatore, Amravati, Raipur and Nagpur. The assets were earlier in the development pipeline.

Leading international property consultants (IPCs) like Cushman & Wakefield (CW), Ernst & Young (E&Y) and Jones Lang LaSalle Hotels (JLLH), among others, too confirmed the rising flow of mandates for buying and selling of hotel assets across the country. But putting a figure to the number of hotel assets on the block is difficult because each one works on a slew of exclusive mandates and there are non-disclosure agreements in place to protect the identity of the buyer or the seller.

Akshay Kulkarni, executive director - residential services, Cushman & Wakefield, said: “The current activity level is certainly high and I’m confident that the sector will see a good number of transactions getting concluded in 2012-13. In fact, we are working on a few hotel transaction mandates and are likely to close some deals by the first quarter of the next fiscal.”

Deals currently being pursued by the IPCs are a mixed bag of operational hotels, incomplete structures and land parcels earmarked for hotel projects. While cities like Mumbai, Delhi, Bangalore and Chennai are certainly on the radar, others like Pune, Hyderabad, Kerala and Goa are joining the brigade, too. Interestingly, ‘sell’ mandates seem to be on the higher side vis-a-vis ‘buy’, thus making it very challenging for the broking community to find potential buyers.

Talking about the profile of prospective buyers, Chintan Patel, director, real estate and hospitality services, E&Y India, said strategic and financial investors are best suited for land parcels and incomplete structures. “The current market scenario, however, is more opportunistic for high net worth individuals (HNIs) in the case of already operational hotels. In fact, the timing is much better also because of a depreciating rupee,” Patel said. Reasons to sell hotel assets vary for different companies. While DLF is keen to shift focus from non-core assets, for DB Hospitality, the priority is to raise funds to mitigate debt pressure on the books. And as for ROHL and KHIL, ramping up hospitality presence in key metros to access capital is a big driver.

But are valuations realistic for faster closure of deals? A senior consultant with one of the domestic hospitality consultant companies said, “Deals generally take longer to conclude mainly because of valuation issues between the buyer and the seller.”

So, is distress one of the reasons for companies to sell hotel assets? The IPCs feel otherwise. “There is some stress in the market for sure but it certainly has not reached the distress situation. While buyers are not giving high premium, sellers have also become realistic with their expectations. This is why the market has seen a few deals getting concluded in the recent past.

This momentum will only increase next year,” said Patel. Some of the deals that are expected to get concluded include projects from BSE-listed Viceroy Hotels, which is expected to complete the sale transaction of its Chennai hotel and residential projects with Mahal Hotel Pvt and Esteem Housing Developers Pvt, respectively. The deal size reportedly is in the region of Rs500 crore.

Similarly, DLF Hotel Holdings — which recently acquired Hilton’s 26% stake in the JV for Rs120 crore — is rumoured to have sold its four land parcels to Kolkata-based Square Four Housing & Infrastructure Pvt for Rs550 crore.

Rajesh Exports to expand jewellery stores six-fold

This story first appeared in DNA Money edition on Tuesday, December 20, 2011.

Rajesh Exports has embarked on an ambitious expansion of its retail chain ‘Shubh Jewellers’ with a goal to become the largest jewellery retailer in the country.

The BSE-listed jewellery exporter which operates 73 stores in Karnataka is planning to increase it to 550 across the south Indian states in the next three years.

It plans to invest about Rs6,600 crore for the expansion and expects revenues of Rs25,000 crore by 2014.

Siddharth Mehta, chief strategist, Rajesh Exports, said that the company aimed to have 125 stores in Karnataka by April 2012.

“Another 50 stores will be added in Karnataka after which we will expand into Tamil Nadu, Andhra Pradesh, Goa and Kerala. All stores follow a unique franchisee model, wherein established jewellers are brought into the network,” Mehta said. These stores are refurbished according to the Shubh format and require an investment of Rs15-20 lakh from the franchisee, he said, adding that day-to-day management and other operating costs would be taken care of by the franchisee and Rajesh Exports would invest in the inventory at these stores.

“The franchisee’s share in the overall revenues generated from the store is 2.3% of the profit,” he said. The average size of a Shubh store is 500-600 square feet, though the company also has stores that are as small as 300 sq ft going up to 3,000 sq ft.
With a rollout of these 125 stores by April 2012, the company expects to become the largest retail jeweller in the country.

Through the network of 550 stores, the company is eyeing 8% of the domestic retail gold jewellery trade.

For the first half, the company generated Rs650-700 crore sales through 48 stores. “Around 25 stores were added during the Diwali period and hence revenues from those stores haven’t been included in the figure.The net profit from 48 operational stores was in the range of Rs42-45 crore,“ said Mehta.

The expansion would be funded through a mix of internal accruals, external commercial borrowings and credit from suppliers. The company has Rs2,000 crore of internal accruals and is at an advanced stage of negotiations for debt with foreign financial institutions at a rate of Libor + 4.5%. It expects to close the ECB by May-June 2012.

Yummy! Ready-to-eat foods eye centre of thali

My colleague Shailaja Sharma is the lead writer of this story which first appeared in DNA Money edition on Wednesday, December 21, 2011.

Ready-to-eat (RTE) foods are no longer a no-no. Packaged French fries, cheese nuggets, parathas, samosas, aloo tikkis... all are tickling the Indian tastebuds.

The RTE segment is growing at 25-30% annually, say analysts. “It was crawling a few years ago. Now, it has started to walk. The segment will run in a few years,” says Sushil Sawant, vice-president, Godrej Tyson Foods.

Analysts think urbanisation, rise in the number of working women, higher disposable incomes and evolving consumer habits are all making processed foods popular, promising rapid growth for the segment.

Vadilal was among the early movers. In 2000, it began export of ready-to-eat curries, parathas and snacks to 20 countries. Rajesh Gandhi, managing director, says organised retail has expanded with the entry of new players in the last two years. “Indian consumers are ready to try these products.”

Vadilal now sells frozen products like plain and stuffed parathas, samosas, kachoris and springrolls in India under its brand Quick Treat. Given brisk sales, it expects to notch up Rs15 crore from new launches alone this year.

Other players are optimistic, too. Come February 2012, Signature International Foods will launch a range of Indian naans, kulchas and parathas as well as international items like tortilla wraps and pizza bases. Its massive Nashik unit boasts a daily capacity of 1 million chapatis and 5 lakh naans.

Given the Indian consumer’s penchant for good deals, Signature will offer a pack of four naans weighing 80 grams for Rs65, says Gaurang Bhasin, head, sales and marketing.

McCain Foods swears by similar strategy. The Toronto-based firm recently introduced smaller trial packs of its frozen French fries, Super Wedges and Smiles, priced Rs25, after winning customers for its Aloo Tikki, Crunchy Potato Bites, Tandoori Vege Nuggets and Vege Burger.

Other players such as Venky’s India, Temptation Foods and Al Kabeer are keen to garner market-share. Godrej believes frozen foods sales will touch $700 million in four years. “Snacking has always been an integral part of our culture. The snacks industry is getting organised. The opportunity is huge,” says Sawant.

Yet, frozen foods have not reached the centre of the thali (platter) at Indian households. But firms like Godrej and Vadilal, with their strong distribution networks, are seeking to make convenience foods part of Indian lifestyle.

They are confident the task won’t prove daunting , given that over 40% of the household spend is on food. The share of packaged foods may be small, but with a 30% growth, anything is possible.
Industry estimates suggest consumer spend on food in India will grow from $330 billion now to $900 billion by 2020. Processed foods account for $40 billion already, with packaged food market estimated at $10 billion (and likely to reach $20 billion by 2014).

Such heady facts and figures are encouraging processed food firms to bet big on India. For instance, West Coast Fine Foods, a distributor of frozen foods in India and owner of frozen seafood brand Cambay Tiger, is launching Malaysian frozen paratha brand Kawan in India this month.

Rahul Kulkarni, director, marketing, says the time-starved working Indian consumer “is spending less time in the kitchen and is adopting the branded ready-to-heat-and-eat option to suit her lifestyle”.

What does all this signify? “The sign is unmistakable: the urban Indian household is undergoing a quiet revolution. The trend is accelerating because of both socio-economic factors and lifestyle reasons,” says Kulkarni.

India Hospitality ends deal with Entertainment World

This story first appeared in DNA Money edition on Friday, December 9, 2011.

Blank-cheque firm India Hospitality Corp (IHC) has called off a Rs100 crore deal with real estate company Entertainment World Developers Pvt Ltd.

Under the deal, London Stock Exchange’s Alternative Investment Market listed firm was to lease and operate the realtor’s 10 under-development hotels and 14 food and beverage outlets in non-metros.

IHC was to also acquire Treasure Food & Beverage Pvt Ltd, the franchisee for Pizza Hut in central India, from Entertainment World.

IHC was doing the deal through its Indian subsidiary, Gordon House Estate Pvt Ltd, in which Entertainment World was to pick up a 15% stake.

The alliance announced in September 2009 was to be completed in three years. However, there was a buzz in the market sometime back that IHC was reviewing the partnership and now sources have confirmed that the deal has been called off.

"There has been no progress on the deal between IHC and Entertainment World. It has been terminated finally, with both parties free to go their own ways,” said an industry source.

Financial constraint faced by IHC was the key reason for the partnership to be called off, the source added.

Officials from IHC and Phoenix Mills, which owns 42% in Entertainment World Developers, were not available to comment.

The hotels and F&B outlets to be leased and managed by IHC were part of Entertainment World’s 24 million square feet development pipeline across India including 11 shopping malls, 10 hotels and 11 townships.

Entertainment World was developing a total of 900 hotel rooms across 10 locations. The first phase comprised 352 rooms across Nanded, Ujjain, Jabalpur, Bhilai and Raipur, and second phase 548 rooms across Chandigarh, Udaipur, Amravati, Indore and Thiruvanathapuram.

Faced with own set of financial challenges, Entertainment World is understood to be going slow on further developments, including those that were under the deal with IHC, and is currently believed to be undergoing a restructuring exercise to turn around its existing operations.

It was planning raise Rs500-600 crore last year through an initial public offering by selling 25-30% stake mid-2010, but could not because of unfavourable market conditions.

Delays turning hotel breakevens elusive

This story first appeared in DNA Money edition on Tuesday, December 06, 2011.

Delays and cost escalations are set to double the breakeven time for several upcoming upscale hotels in the country, including those of Leelaventure and French Group Accor, which are 2-3 years behind schedule and face a cost overrun of several hundreds of crores.

Several projects that were announced during the boom period in 2006-07, were affected by the economic slowdown of 2008-09 as funding dried and demand fell.

Experts said of every 100 guestrooms being built around 36 are behind schedule, which means only 48,000 guestrooms from the current total pipeline of 75,000 are at various stages of completion and the balance 27,000 are delayed.

Among the notable examples, Shangri-La hotel coming up at High Street Phoenix, Lower Parel, Mumbai and Sofitel at Bandra-Kurla Complex that were scheduled to open in 2009 have been delayed by almost three years and are only expected to receive guests next year. Work on both the hotels had started in 2006.

In case of Sofitel, the delay was because the French hotel group Accor decided to reposition it as a luxury hotel.

“The brand specs were redefined which led to change in the entire development plan. It not only delayed the development but also increased the cost per key from Rs80 lakh to Rs1.2 crore. The overall cost is now pegged at over Rs800 crore,” said an industry source. The total cost of the 302-key hotel was pegged at Rs473 crore. “Taking the cost escalation and the current stressed market scenario into account, the hotel’s breakeven will get extended by another 3-4 years at least,” said the source.

The asset owners could recover their investment in the hotel after 11 years from the time it gets operational as against 5-7 years earlier. Accor is also an investor in the hotel with Shree Naman Group, the asset owner. Michael Issenberg, chairman and chief operating officer, Accor Asia Pacific, recently told DNA that Accor continued to hold 40% stake in the development, which means it has to make further investment to maintain stake.

The over 400-room Shangri-La got delayed mainly because of issues with contractors. However, work resumed post hiring of new contractors late last year by the asset owner, Pallazzio Hotel and Leisure Ltd, a subsidiary of Phoenix Mills, and the property is now expected to be soft launched by April and a full-fledged opening by September.

The overall cost of the project as per 2010 timeline was estimated to be around Rs700 crore. A recent report by brokerage Edelweiss Securities has now pegged it at Rs835 crore. “The breakeven situation with Shangri-La is more or less similar to the Sofitel at BKC. I certainly don’t see it breaking even in the normal 5-7 years,” said top industry official.

Among the other hotels that have got delayed include the 250-room Ritz Carlton in Bangalore, being built by Nitesh Estates. The initial cost projection in 2007 was Rs450 crore, which has now risen to `700 crore. Industry experts feel the delay and cost escalation has been so severe that it may not be a viable project for the asset owner anymore.

Hotel Leelaventure’s hotel in Delhi also faced minor delays but it has its own challenges related to cost escalation. The Delhi market has seen a fairly good supply of hotels as a result the average room rate there is severely under pressure. The market scenario is expected to remain more or less the same for a while now and impact the breakeven of the hotel, a source said. The group’s Chennai hotel has been delayed by almost two years and is likely to open mid-next year.

Work on Emaar MGF’s JW Marriott hotel in Delhi, too, has been stalled for a while now with no updates on its resumption.

Experts say while a delay of few months is manageable, projects that deviate two years or more from their schedules affect profitability drastically and even make the project unviable.

Siddharth Thaker, managing partner, Prognosis Global Consulting, a hospitality advisory firm, said. “Breakeven is a function of how much leverage you have on the project. A delayed project inflates the interest component on the debt. The entire pressure is met through the operating cash flows of the hotel.”

The other factor is that the hotel misses the business cycle as the entire market dynamics changes, particularly the supply-demand situation, Thaker said.

Concept Hospitality to add over 650 guestrooms in 2012-13

Focusing on the five-star accommodation segment, Lighthouse Fund-backed Concept Hospitality Pvt Ltd (CHPL) will add over 650 guest rooms in the financial year 2012-13. A pure play hotel management firm, Concept has lined up a slew of launches across cities like Mumbai, Chennai, Chandigarh and Tejpur (Assam). CHPL’s current development pipeline includes 15 hotels across metros, tier II and III cities in the country of which the management expects 8 hotels to be operational by March 2013.

Param Kannampilly, chairman and managing director, CHPL, said, the company added a little over 500 guest rooms in the last 12-odd months taking the total number managed guestrooms to 1,207 across 20 hotels. “The next 12-16 months will see 8 new hotels getting operational adding approximately 660 guestrooms. All the new hotels will be five-star carrying The Fern flag. Among the new launches, five properties will be launched in the city of Chennai and will also mark our foray there,” he said.

The company – on a collective basis – is targeting a turnover of Rs 200 crore for the current fiscal of which Rs 65 crore has been achieved in the first half already. “We are currently in the business season and will enter the peak season in a few weeks from now. We are very much on track to achieve the Rs 200 crore turnover target in this fiscal as against Rs 120 crore in the previous financial year,” he said. On an entity level, CHPL (as a management company receiving management fees and other revenues) will register a turnover in excess of Rs 12 crore.

Managing hotels under The Fern, The Fern Residency and Beacon brands, CHPL will opened four 'ecotel' hotels in the five-star segment adding over 300 guest rooms under its flagship 'The Fern' brand across key metros and mini-metros in the country.

In Mumbai, the hotel management company opened Hiranandani Group’s second ecotel project the 141-rooms, Meluha - The Fern at Powai in March 2011. The first one – Rodas - an Ecotel hotel – also in Powai is managed by Concept as well. The company also manages a 35-room boutique hotel at Bandra called Grand Residency. Another 75-room hotel is currently in the final stages of completion and will come up in Chembur early next year and will be branded as The Fern Residency. The company’s fifth hotel in Mumbai is currently under development in Goregaon and is likely to start receiving guests sometime in 2014. “Going by the letter of intends (LoI) we have signed already Mumbai and Chennai will be two cities with five hotels each,” he said.

Elaborating on the funding for new developments, Kannampilly said, investment for all the hotels will be done by the respective asset owning companies with Concept coming in as a branding, operating and management partner. On an average, the cost per key for The Fern hotels ranges between Rs 55 to Rs 65 lakh excluding land and financing costs. In the three- and four-star categories, CHPL manages hotels under 'The Fern Residency' brand. The average cost per room for this category of hotels is Rs 25 lakh excluding land and financing costs.

The company is actively pursuing management contracts in the international markets and is currently in discussion with hotel asset developers in countries like Bangladesh, Tanzania and South Africa. While in Tanzania CHPL is mulling an eco village cum city-based resort project, it will be a management contract initially in Bangladesh followed by a joint venture with the same developer to manege eco-friendly hotels there. As for South Africa, the company is doing a management contract for a four-star hotel in the outskirts of Johannesburg.

DLF acquires Hilton's 26% stake in hotels JV for Rs 120 cr

DLF acquires Hilton's 26% stake in hotels JV for Rs 120 cr

DLF Ltd has acquired 26% stake held by Hilton in its joint venture company DLF Hotels & Hospitality Ltd (DHHL) for Rs 120 crore. The stake was acquired by DLF's wholly owned subsidiary (WoS) DLF Hotel Holdings Ltd which had 74% in the JV and the balance was held by Aro Participation Ltd and Splendid Property Co Ltd, affiliates of Hilton International Co.

The joint venture was instituted back in 2006-7 to set up a chain of hotels across the country. However, the realtor had to shelve plans because of the economic downturn in 2008 which impacted a host of real estate companies.

Confirming the development, a Hilton Worldwide spokesperson said, “DLF Ltd (DLF) has bought the 26% shareholding of Hilton Worldwide in the Hilton-DLF joint venture company. We value our relationship with DLF, and our association will continue with our managing the DLF-owned Hilton Garden Inn brand hotel in Saket, New Delhi. The hotel has performed very well and has won several awards including the prestigious HVS award for hotel of the year at the Hotel Investment Conference – South Asia in 2010.”

The DLF-Hilton JV was to build a chain of hilton branded hotels across the country over a period of 5-7 years from instituting the company. As per the arrangement Hilton was to invest up to $143 million in the 75-odd hotel developments to be undertaken by the JV company.

However, with this transaction getting concluded, DLF Hotels now becomes a wholly owned subsidiary of DHHL. DLF spokesperson when contacted confirmed the deal value to be Rs 120 crore and that the joint venture currently has 4 hotels sites one each in Kolkata, Chennai, Trivandrum and NCR.

"The transaction has been done to take complete ownership of the company and its underlying assets including unbuilt hotel sites with a view to monetize them. This is part of DLF's ongoing strategy to divest non-core assets," said the spokesperson.

ITC set for international foray with luxury hotel in Colombo

Cigarette to hospitality company ITC Ltd is set to enter the international hospitality market with a luxury hotel in the capital city of Sri Lanka, Colombo. The Indian hospitality major is currently in the last leg of discussions with Sri Lankan government and expects the deal to get sealed very soon.

ITC Hotels’ spokesperson confirmed the development saying final details are still being worked out. “All I can say at present is that details about the land parcel, investment, brand, guestroom inventory etc are being discussed,” he said. The project will be developed as a green hotel.

Quoting Sri Lankan government sources, a PTI report said that the ITC is likely to invest Rs 1,544 crore ($300 million) for the said project. The government has approved a $300 million foreign direct investment (FDI) enabling the hotel to be built on 5 acre land parcel located in close proximity to military headquarters in Colombo's famous Galle Face landmark beachfront on a 99-year lease, said the PTI report.

“ITC is a reputed hotel investment group in India, with investments and hotel in India. The government hopes that its presence in Sri Lanka will be a significant contribution toward promoting FDI and the tourism industry in the country,” said the Sri Lankan government information department.

The report further added that the Board of Investment of Sri Lanka will enter a Memorandum of Understanding (MoU) with ITC Hotels enabling the firm to execute the project under concessionary tax terms with permitted exemptions on investments.

The land parcel in discussion was earlier allocated to China Aviation Technology Import Export Corporation (CATIC) for $73.5 million for a hotel project. However, the Chinese firm later withdrew and the Sri Lankan government is in the process of reimbursing $54.4 million dollars already paid by CATIC for the lease of land.

Also Read: ITC will manage third-party hotels...

IndiaReit Fund to exit 2-3 investments in 2012

An edited version of this story first appeared in DNA Money edition on Friday, December 02. 2011.

Come 2012 and IndiaReit Fund, a subsidiary of Piramal Healthcare Ltd, will be looking to exit from 2-3 investments made from its developments funds till date. The exits are expected to give the real estate focused investment firm between Rs 450 to Rs 500 crore. The firm will also look to make a couple of new investments with some of their existing partner companies.

Ramesh T Jogani, managing director and chief executive officer, IndiaReit Fund Advisors Pvt Ltd, said, “We are talking on exits with all our investments but there is nothing that will happen in the next one or two months. It will take a couple of quarters for a few deals to conclude because when you talk to four people one might get active and eventually fructify,” he said without giving specific details.

Jogani said that since exits cannot be planned, the management basically works towards building on their entry point. “We have made enough exits from all our funds and when the time is right we take the exit call. The preferred route is selling back to the developer (buyback), exits through third-party or a real estate fund,” he added.

IndiaReit currently manages a corpus of over $900 million, spread across four funds (three domestic funds and one offshore fund), besides the AIM-listed Trinity Capital Plc. The investment firm recently invested Rs 200 crore in Mumbai-based Omkar Realtors’ mixed-use development at Mumbai’s premium location i.e. Worli. The investment was made from its Rs930 crore Domestic Fund IV.

Elucidating their approach to investing in current market scenario when investing in real estate is not concerned as smartest of the moves, Jogani, said that as a rule an investor must invest when times are not very good. “This is because you can get good opportunities. Investing into Omkar’s special purpose vehicle for the Worli development falls in this category and makes for a very good investment. Besides offering a prime location for development, we also have a very lucrative entry point with this investment. If we launch it at the right price, there is enough demand and the market will lap it up. I think liquidity is not an issue in Mumbai but affordability certainly is. We have worked out the affordability level and worked backwards before making this investment,” he said.

While the investment in Omkar SPV doesn’t give IndiaReit a stake it gives them preferred returns and a percentage on upside. “We have invested Rs 200 crore and if everything goes as per plans we should get 2.2x in terms of money multiple post tax,” he said.

The investment firm recently launched an Rs500 crore rental yield fund with a green shoe option of Rs250 crore. An offshore fund it will have a life of 6 years and money will be raised through high net worth individuals, particularly the non-resident Indians (NRIs) from Dubai, Middle East and Singapore. “It will be placed through leading players like ICICI and HDFC with a minimum investment of $100,000. An internal research was conducted to study the investor appetite and we found there was enough excitement in the investor community especially with rupee depreciating against the dollar. We have just started the road show and will take 5-6 months to close the entire fund raise,” said Jogani.

In terms of investment pipeline, the firm has been largely focusing is on five cities namely Mumbai, NCR, Pune, Bangalore and Chennai. It was also looking at the Hyderabad but since the real estate scenario there isn’t looking very good owing to political issue, oversupply in residential and commercial space the management has now de-focused from further developments there.

The firm is currently working with 9 partners however is not restricted to any opportunities outside these set of companies. The activity is largely in the residential and commercial segment and the investment sweet-spot is Rs70 – Rs80 crore in Tier II markets while it is Rs 200 crore in cities like Mumbai as properties are more expensive.

“Our chief reason to invest in a project is our lucrative entry point such that even if market falls beyond a certain point we do not loose money. For example if Rs100 is the selling price, I’ll remove Rs30 as construction expenditure so we are left with Rs70 and my entry price will be anything between Rs25 to Rs30. This approach allows us to make at least 2x returns from day one from any of our investments. If the markets go bad it could come down to 1x but if the markets improve we could get a return of 3x – unfortunately no one has seen that kind of returns (3x) in the last five years though,” he said.

Between the four funds, IndiaReit currently manages Rs 3,000 crore out of which Rs 350 crore is yet to be deployed. The Rental yield fund will add Rs 750 crore taking the available cash for investments to Rs 1,100 crore odd in calendar year 2012. “It is decent enough corpus to meet our investment activity for the coming year. Besides, fund raising is an annual affair for us so we may look to raise another one sometime next year,” he said.

IndiaReit’s current investment portfolio comprises 7 investments with a commitment of Rs620 crore across residential, commercial and hospitality projects. Seven investments with a commitment of Rs 290 core in Bangalore for residential projects. In the Hyderabad market, it has committed Rs 300 crore across 5 investments developing residential and integrated townships, 2 investments in Pune with a commitment of Rs350 core for residential and integrated townships, 1 investment of Rs24 crore in Chennai for residential project and Rs 20 crore for another residential development in NCR.

Reliance MediaWorks partners VenSat Tech for Chennai VFX studio

Anil Ambani-led film and entertainment services company Reliance MediaWorks Ltd (RMWL) has got into a strategic alliance with VenSat Tech Services to expand its visual effects (VFX), computer graphics (CG) and animation capabilities the country. As part of the arrangement VenSat will also set up a studio in Chennai dedicated exclusively for VFX, CG and animation projects allied with RMWL for Indian films.

Anil Arjun, chief executive officer, RMWL, termed the alliance as a strategic win for the company in many ways. “The alliance augurs well with our market positioning as an end-to-end service providers to the Indian media and entertainment inducts wherein VenSat gives us direct presence in Chennai enabling us to strengthen reach in the southern film market. This apart, their creative and technical expertise adds depth to our existing capabilities to execute projects in the Indian film market,” said Arjun.

As part of the arrangement, one of VenSat’s co-founders Venkatesh Roddam will take over a new role and join RMWL’s management as CEO of its entire film and media services division based out of RMWL’s Los Angeles office in the US. The alliance with VenSat is RMWL’s second initiative to beef up presence in south India media and entertainment market. Earlier, towards October end this year, the company had taken over management of Hyderabad-based Annapurna Studios, which is owned by veteran Telugu actor Akkineni Nageswar Rao’s family.

While financial details related to setting up of the new facility in Chennai were not disclosed, RMWL official said that VenSat already operates with over 200 artists from a studio spread across 14,680 square foot at Ascendas IT park in Chennai . The new dedicated studio will be carved out from the existing space and will house a team of 50-odd artists who will work exclusively on Indian film projects bagged by the alliance. Adding the Chennai facility will further enhance RMWL’s present strength of over 1000 artists between its Mumbai and London studios that handle domestic and international projects respectively.

Not restricting the services to just south film industry, the alliance will tap film projects from across the country thereby gaining a significant pie of the film and entertainment services business in the country. The size of animation, VFX and post production industry, according to KPMG, was pegged to be at Rs 2,360 crore in 2010 and witnessed a growth of 17.5% as compared to 2009. Industry experts envisage the growth momentum in this sector to continue in the coming years with a cumulative annual growth rate (CAGR) of 18.5% to reach Rs 5,590 crore by 2015.

In terms of value-proposition the alliance will offer its clients vis-a-vis existing competition in the market, Satyanarayana Mudunuri, executive director and co-founder VenSat Tech Services Pvt Ltd, said that competition continues to intensify both domestically and around the globe.

“The market situation calls for identifying key competitive advantages and focus on core competencies. Developing and harnessing the right competitive advantage will greatly improve our chances for success in getting new projects. We (RMWL-VenSat) will be able to leverage and complement out combined strengths and competencies to create meaningful synergies that would augment the market place. There are a few players in the industry but a strategic alliance as this will certainly bring great value to customers,” said Mudunuri.

VenSat, co-founded by Satyanarayana Mudunuri and Venkatesh Roddam in 2009, is a global provider of creative services for the international motion picture, television, home entertainment, gaming and mobile entertainment markets. Among some of its big budget projects include high grossing films namely Dabangg, Robo, Bodyguard and Ra.One.