Hirco is a London Alternative Investment Market-listed, Philadelphia-based investment company affiliated with the Hiranandani family’s eponymous real estate venture.
Jame DiBiasio
HONG KONG: The investment arm of one of Mumbai’s leading developers, Hiranandani Group, is in talks with global investors about raising capital via strategic tie-ups or other structures to expand property projects, at a time when investment in Indian real estate may be further liberalised.
Hirco is a London Alternative Investment Market-listed, Philadelphia-based investment company affiliated with the Hiranandani family’s eponymous real estate venture.
It is interested in exploring different ways to work with global investors experienced in property, be it through loans, private placements or debt. Hirco’s balance sheet is currently unleveraged and the group wants to exploit Hiranandani’s landbank and project pipeline, explains Aniruddha Joshi, executive director at Hirco.
“We want investors who understand real estate in India, or are willing to learn,” Joshi says. “These investors should realise these are 7-9 year projects and not focus on the short-term ups and downs of the Mumbai stock market. They should have high standards of corporate governance and bring international expertise that we can benefit from.” He declined to say how much capital Hirco would like to raise.
There is a paucity of developers in India with international exposure and a commitment to shareholder rights, so Hirco has in fact been in talks with many prospective investors. “It’s a question of structure and pricing,” Joshi explains, noting that many foreign real estate funds, established since liberalisation in 2005, have come to realise how difficult the market can be.
Hirco listed on AIM in 2006 and raised £360 million. Already, however, 97% of that sum has been committed to a quartet of township projects in two locations, one outside Chennai, the other in Panvel near Mumbai.
Like Hiranandani’s earlier township projects, these are mixed-use and commercial sites that include high-end residences, office towers, hospitals and hotels.
The first ones were built starting in the late 1980s, in Powai and Thane, two locations outside Mumbai, which have evolved into premium residential and corporate addresses; tenants include the likes of Lehman, Prudential and brand-name foreign and Indian corporations. These townships also require the proper infrastructure often being built from scratch.
Hirco was launched when, in 2005, the Indian government allowed foreign direct investment into the domestic real estate sector, albeit restricted to large greenfield developments, with no secondary trading allowed.
The structure of the projects has allowed it to invest its capital quickly: Hiranandani owns 100% of the townships’ common stock and handles the development, while Hirco owns 100% of preferred stock with an annual coupon of 12%.
As these projects generate cash, the money goes first to Hirco’s coupon, then its capital, then to the Hiranandani family, and the remaining profit is split between them.
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