DLF SEZs first to get hedge fund investment

MUMBAI: De Shaw, the leading US hedge fund with over $30 billion in assets, has invested $400 million in a DLF group firm that will set up special economic zones across the country, a person familiar with the situation told ET.

This is the first known instance of an overseas private equity/hedge fund investing in SEZs in the country and comes at a time of raging controversy over whether these are meant to drive economic growth or land grab aimed at profiting big businesses.

The group company of DLF Assets, DLF Universal is launching a large public offering of shares aimed at raising over $2 billion. The issue is expected to open later in the week. DLF Assets Private Ltd, DLF affiliate firm is setting up SEZs in Gurgaon, Chennai and Hyderabad. Details of valuation and the stake being held by DE Shaw are not known.

Anil Chawla, country head DE Shaw India declined to comment on the transaction. A senior DLF group official denied the development but a person close to the transaction said that an announcement will be made on Monday. DE Shaw has also informed the Reserve Bank of India about its investment plans, the person said.

The New York-based DE Shaw is one of the world’s leading hedge funds. Absolute Return, a hedge fund intelligence publication ranked it among the top five global hedge funds with assets under management of over $26 billion in March this year.

Typically hedge funds and other private equity firms investing in closely-held, unlisted companies will look to sell their holding either back to the promoter, to other private equity firms or in the stock market. In this case, DLF Assets Private Ltd is expected to look at an initial public offering in about two to three years giving DE Shaw the chance to exit.

In India, DE Shaw has a software development and support centre in Hyderabad employing about 500 people. Mr Chawla from GE Capital was hired some time last year to head its investment activities in the country. DE Shaw’s India portfolio comprises entertainment firm Crest Animation and Hindi language daily newspaper Amar Ujala.

Ever since the government decided to allow companies to set up special economic zones across the country, India Inc has rushed in with big plans for projects across the country.

This has predictably caused a storm of protests from farmers, whose land is being coveted by the big companies, and other dislocated persons. Earlier this year, protests against Indonesia’s Salim group’s SEZ in Nandigram in West Bengal turned violent forcing the government to apologise and scrap the project.