Indian Real Estate: Foreign Investments

By: Propertiesmls

Prasad V. Potluri, an NRI serial entrepreneur with a considerable appetite for deal making has agreed to take complete control of Chennai-based real estate company SSI, in a deal valued at Rs. 900 - 1,000-crore.

He will be buying out the Kalpathi Suresh family's 70.85% stake in SSI and will be making an open offer for up to 20% to other shareholders in the firm. While, it is not known what price will be offered for the shares, however SSI's market price of Rs. 157.70 means, promoter holding in SSI is worth about Rs. 646.57-crore. Mr. Potluri can be expected to pay a premium price for stakeholder shares, and if the open offer is successful, it will take the deal value close to Rs. 1,000-crore.

With the conclusion of the deal, an announcement can be expected soon. SSI, formerly a software services and IT education firm has substantial real estate holdings in Chennai, including a 70-acre property in Chennai's Perambur area, which it bought from the defunct Binny Mills Corporation. As well, it also owns a hotel in Ooty and a 37-acre property near Mahabalipuram on the bustling East Coast Road.
Real estate transactions have been getting pricier in recent times as funds flush with cash look to take advantage of soaring property rates. Real estate companies are busy raising money to build more office complexes, townships and residential apartments.

In the last year alone, three major high-value transactions have taken place, all of them involving foreign funds and local developers. J.P. Morgan invested Rs. 274-crore in Lodha Builders and Morgan Stanley signed an agreement for an investment of Rs. 300-crore with Mantri Developers. Again, Morgan Stanley agreed to invest more than Rs. 675-crore in Oberoi Constructions in the largest private equity deal in the real estate sector.

The SSI deal though is different since it is a complete buyout. If, the open offer is successful, Mr. Potluri will end up spending more than Rs. 825-crore on the transaction.

SSI and its founder Kalpathi Suresh are no strangers to deals and M&A transactions. Mr. Suresh began started a software services and IT education firm, in 202 he sold it to IT education firm Aptech, including off-loading his software services firm to Scandent Solutions, only to turn his attention to real estate.

Involved in deal making in the past, Mr. Suresh and Mr. Potluri know each other well. The year 2000 saw SSI buying Albion International, then owned by Mr. Potluri for $63.5-million. It remains to be seen what the latter intends to do with his new real estate firm, whether he expands it or tires of the new toy, exchanging it for something else.

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Source:

India Properties
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