Retail real estate gets Rs 1,000 cr private equity investments in Jan-May

During the entire 2008 calendar year, PE investment in retail real estate stood at USD 267 million.

“As of May 2016, the total private equity investment into Indian retail real estate stood at USD 149 million or Rs 10 billion. This has beaten most industry experts’ expectations,” JLL India Managing Director (Capital Markets & International Director) Shobhit Agarwal said in a report.

The figure has exceeded investment attracted by the Indian retail real estate industry in the year 2007 and could very well cross the previous high seen in 2008, he added. “PE investment into retail almost dried out after 2008 until the year 2015, with 2012 being the only exception,” Agarwal said.

Stating that retail real estate has become attractive again for private equity investment, he said that investment by private equity biggies into retail properties would continue in the next six months.

 “Economic and political stability, liberalisation of the foreign direct investment (FDI) policy by the Government and improvement in consumer sentiment are some of the factors working in retail and retail real estate’s favour,” Agarwal said.

Quality mall space is coming up with strong pre-commitments, which indicates that retailers also continue to remain bullish about the long-term India consumption story, the consultant said. “Looking at the scale of ongoing deals, it seems like private equity investment is back into India’s retail sector with a big bang.

“It also goes on to show how retail real estate is back in favour with the global investor community,” he said. Singapore-based GIC invested $149 million into Sheth Developers’ Viviana mall at Thane earlier this year, the report said.

JLL India said that there are a few deals, apart from one big deal, in the works. “If any of these go through, 2016 could prove to be a historic year as far as private equity investment into the retail real estate industry is concerned”.

Meanwhile, PwC said that overall private equity and venture capitalist deals saw a 15 per cent decline in the first six months of this year to $8.47 billion, owing largely to muted activity in the e-commerce space. There were private equity/ venture capitalist  investments worth $8.47 billion across 333 deals, a 15 per cent drop in deal value and 18 per cent fall in number of deals, as against $10 billion of investments across 404 deals during the first half of 2015.

Because of over valuation and profitability concerns, there was a dearth in e-commerce/consumer internet investments segment, PwC said, adding that “some of this was the spiral impact of the slowdown in valuations of some of the overseas peers, and a slow-down in investments by the early stage investors”.

The energy and healthcare sectors, which contributed USD 1,908 million and USD 1,199 million in deals in the first half of last year saw drop in numbers to USD 960 million and USD 687 million in the January-June period of this year. However, investor interest in healthcare, renewables and the financial services sector continues to be high, PwC India Leader (Private Equity) Sanjeev Krishan said.

He added that there are a number of assets of scale in the market, in particular in the renewables and the healthcare sectors which should drive PE volumes in the second half of this year. Optimism about the opportunity for private equity in India remain bullish, PwC said. 

“The Indian macros continue to look good and the Economy has shown resilience in the face of some adverse news during first half,” it said. Moreover, there are likely to be consolidation opportunities in the consumer internet segment as well as stressed situations in the infrastructure and industrials space — good for private equity funds.

Meanwhile, gold prices surged by Rs 393 to Rs 32,346 per 10 gram in futures trade in the evening session on Wednesday as participants enlarged positions, tracking a firm trend overseas. The exchange opened for the evening session as it remained closed in the morning for ‘Id-Ul Fitr’.

At the Multi Commodity Exchange, gold for delivery in August surged by Rs 393, or 1.23 per cent to Rs 32,346 per 10 grams in a business turnover of 300 lots. On similar lines, the yellow metal for delivery in far-month October rose by Rs 385, or 1.19 per cent to Rs 32,740 per ten grams in 43 lots.

Analysts attributed the rise in gold prices to a firm trend overseas as fears of Brexit impact resurfaced. Meanwhile, gold gained 1.1 per cent to $1,370.75, after earlier touching the highest since March 2014 in London.