WDC Ventures Ltd, an investment arm of Wachovia Bank, has sold its 49% stake in Vijay Associates Constructions Pvt. Ltd for Rs.185 crore.
Vijay Associates is the Wadhwa Group SPV that is building four 44-storey residential towers in a plot at Oshiwara (Mumbai) owned by B.E.S.T. Wachovia is now part of Wells Fargo group which took it over in 2008 after the global credit crisis.
Vijay Associates bought back the stake from Wachovia in deal structured by 
India Infoline’s investment banking arm and funded by clients of India Infoline’s PMS division and India Infoline’s NBFC.
The deal was structured in the form of high yield debentures issued by Vijay Associates divided in tranches. Private placement of the first tranche of debentures worth Rs182 crore happened in May-end to India Infoline Investment Services (NBFC), and India Infoline Wealth Management (PMS).
The NBFC is also acting as the agent for future tranches.
Transaction Reference: Mint
An email circulated by the NBFC mentions the total size of the issue to be Rs.450 crore. The PMS division is selling these debentures to its clients; HNIs who will invest a minimum of Rs.50 Lakh in the debentures. These instruments carry a yield of 16% with a face value of Rs.1 Lakh each. They have managed to place these securities with less than 50 individuals, the threshold for private placements. Public issues have to undergo significant regulatory scrutiny in comparison to private placements.
The project has two of the four towers in advanced stages and is being markets for Rs. 11,500 per sqft. for a minimum of 1520 sqft built up area per flat. The project has been selling at approximately the same rate since 2008.
Investors in such issues do not have the safety associated with public issues as they are considered “sofiscated investors” who understand the risks associated with these instruments. There have been other such deals in real estate. They are a form of collaterised debt where the land or the development rights are the collateral and yield 16-18%.
If all of this is a sounding like déjà vu, it probably is. Similar instruments were used in the US before the credit crisis, though the scale and the players involved were much bigger.
With bank lending for construction projects restricted by RBI, developers take this as the last resort for financing. Even then there is a limit to the size of funding of this kind without institutional participation.
Apart from this deal WDC has also invested Rs.233.92 crore in Vipul Ltd. for 14.95% stake and Vatika Group in November 2007.
KVEZAR VIEW
| Date | Transaction | Type | Buyer | Size ($mn) |
| 08/07/10 |
Vijay Associates - WDC Ventures Exit |
M&A |
Vijay Associates (Wadhwa) Constructions Private Limited |
41.11 |
| Date | Type | Buyer | Target | Size ($mn) | State |
| 07/02/12 |
Private Equity |
SUN-Apollo India Real Estate Fund |
Assotech Limited |
15.29 |
Announced |
| 06/02/12 |
Private Equity |
Kotak Realty Funds Group |
Orris Infrastructure Private Limited |
16.40 |
Announced |
| 02/02/12 |
Private Equity |
Ascendas India Trust |
Operational Buildings |
36.04 |
Completed |
| 02/02/12 |
Private Equity |
Baring Private Equity Asia Limited |
RMZ Corp Holdings Private Limited |
- |
Announced |
Company |
| Name | Promoters | Office | Competitor | Website |
| Vijay Associates (Wadhwa) Constructions Private Limited |
Vijay Vasudev Wadhwa & Family |
301, Platina, 3rd Floor, Plot C-59, G Block, Bandra Kurla Complex, Bandra (East), Mumbai-400051. Maharashtra, India. |
Parsvnath Developers Limited
BPTP Limited
Unitech Limited |
www.wadhwadevelopers.com |
 |
India Infoline |
