ADCB Macquarie partly exits Nitesh Estates

Och Ziff Capital Group advised ADCB Macquarie Infrastructure Fund (AMIF) has partly exited its stake in Nitesh Estates, the Bangalore based real estate player which is coming up with its initial public offering on April 23.

According to company sources, the deal was concluded just over a month ago and is part of the agreement entitling the promoters to a call option to buy back a certain number of shares assuring 15% return per annum.

“The company’s arrangements with AMIF allowed for a 10% buyback option. The management had to give them (AMIF) an internal rate of return of 15% which was very attractive given what its stock price was going to be in the market. The management exercised the option and bought back 10% of the fund’s holding,” said the source.

The shares were purchased for Rs 32.7 a share aggregating to Rs 22 crore.

Post the buyback, AMIF holds 14.4% of the pre-issue equity share capital in the company.

AMIF had reportedly acquired 25% stake in the Bangalore-based realty firm for Rs 36.5 crore in 2007. While it has partly exited its holding in Nitesh Estates, industry sources told DNA Money that AMIF is likely to put another $5 million in the IPO. The price band for the public offer is Rs 54-56 per share.

The realty company already has two institutional investors on board— Citi Property Investors and HDFC AMC—which in most likelihood will stay put with their investments.

“However, the possibility with Citi in my opinion is that they are looking to exit their investments globally and there is sort of uncertainty on who could possibly be the new owner of their stake in Nitesh Estates,” said an analyst.

“The management is in discussions with a few more private equity investors particularly those from Japan who are keen on investing in the Bangalore market,” said a source.

Among Nitesh’s development pipeline includes two high-end luxury hotels in Bangalore and Chennai under special purpose vehicles (SPVs). City Property Investors holds 74% in the Bangalore hotel SPV which will see Marriott International’s Ritz-Carlton brand debut in India in mid-2011.

For the Chennai hotel, Nitesh Estates is understood to have spoken to a few investors.  “The development is a chunky one and the overall project cost could be Rs 400-800 crore or may be a little more depending on how the entire development evolves. Keeping all the factors in mind, Nitesh Estates is likely to divest between 80-85% and hold on to the balance stake.

In the long term, the Nitesh Estates is looking into the possibility of listing the SPVs in the Singapore as a REIT in two years.