Speaking to CNBC-TV18, Ramesh Jogani, IPAL says the company has appointed two distributors, who have already spoken to investors. IPAL's one fund is based into slum development, which has low capital investment and high returns. That's where we are planning to raise money, Jogani says.
Also Read: Current mkt not suited for raising funds: Karur Vysya Bank
Below is the verbatim transcript of Ramesh Jogani's interview on CNBC-TV18
Q: You said there is a possibility of an internal rate of return (IRR) of about 25 percent, what gives you that confidence?
A: Our fund is focused on a niche kind of real estate segment; it's into slum development. Slum development has low capital intensity, the returns are high because you do not have to borrow money to buy a land, you do not have to borrow money to construct because you are working on presales model. So, it is a low cap investment and all money is generated through cash flows.
Also, we are getting into slum development only after the consents have come in. So, we are making a very late stage entry and for slum land you do not need to buy property; you need to pay the dwellers transit accommodation and get them back when the project is complete and that is why it is a high return model.
Q: Can you take us through the fund raising plans. Have you already begun speaking to investors and how much do you plan to raise and by when?
A: We have appointed two distributors; one for US and Europe and the other for Middle East and South East Asia and they have already spoken to investors. Our road shows would start in January. They have done the due diligence with the developers about us on the site and we are hopeful because given the fact that it's a 25 percent IRR, the risk is low because we are late stage entry and over and above our investment would be collateralised by an independent security. So, we are not taking risk on the slum redevelopment and that is a unique opportunity and that's why we are confident that we would raise money though it would take a year's time before we raise it.
Q: You are raising a fair amount of money on your offshore fund which is about Rs 1,500 crore to Rs 1800 crore. How soon could your PE fund deploy this money because so far, you said you have only committed Rs 50 crore to an ongoing special purpose vehicle (SPV) with the Neumec Group?
A: The money which is invested is personal money and friends and family's money. This is for our investors to see how we go about investing our money and on the back of that our distributors are fairly confident of being able to raise USD 550 million to 300 million. It is a very unique product and is focused only in Mumbai. Mumbai is resilient to price fluctuation and beside that we have a downward protection because it is a low capital investment. We had few investors who have spoken to us and we are confident that we will be able to raise money.
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