Lodha Group raises Rs 540 crore from Kotak Realty Fund via private placement of NCDs

MUMBAI: Realty developer Lodha Group is on a fundraising spree. Lodha raised about Rs 540 crore from Kotak Realty Fund through a private placement of five-year non-convertible debentures. The issue was concluded just before the developer’s $350 million offshore bond sale, which is expected to end this week.

While proceeds from the dollar bond issue will be used for refinancing, the money raised from the debentures will go towards construction of Lodha’s township project, Palava City, spread over 4,000 acres on the outskirts of Mumbai.

“The private placement of domestic NCDs has been concluded recently, ahead of the opening of the overseas bond issue. The funds will be used for construction finance and also a small component will be for promoter cash out,” said a person with direct knowledge of the transaction.

A Lodha Group spokesperson confirmed the transaction with Kotak Realty Fund and added that the funds will be used for the construction of one of the phases of Palava City. The spokesperson declined to comment on the dollar bond issue.

An e-mail query to Kotak Realty Fund remained unanswered at the time of going to press.

NCDs are unsecured bonds issued by a company that cannot be converted into equity and usually have higher interest rates than convertible bonds and bank loans. In the past few quarters, NCDs have emerged as a preferred investment instrument for both private equity funds and real estate developers given the higher yield range of 15% to 18% and non-restriction on fund usage.

The offshore bonds are being issued by subsidiary Lodha Developers International, Mauritius, while units Lodha Developers International Holdings and Palava Dwellers will act as guarantors. The overseas bond issue proceeds will be used to refinance debt and will be invested in international subsidiary Lodha Developers International Holdings for general corporate purposes outside India.

The Lodha Group has acquired two properties for redevelopment in London for Rs 4,000 crore. In early 2014, the group bought a building on Carey Street in London for over 90 million pounds, or about Rs 1,000 crore. In November 2013, it had acquired MacDonald House in central London, which housed the Canadian consulate in the UK, for over 306 million pounds or Rs 3,120 crore.

The group is currently developing an estimated 43 million square feet of real estate projects, with most of its land reserves in the Mumbai metropolitan region. The company had delivered 25 million square feet as of September 30, 2014, with 28 ongoing projects across London, Mumbai, Pune and Hyderabad.