ArthVeda Fund Management (AVFM), a fund management arm of Dewan Housing Finance Corporation (DHFL), India’s 3rd largest mortgage finance company, has launched its second real estate fund – ArthVeda Star. The fund, which is open for domestic institutions and high net-worth individuals aims to raise Rs.2 billion, with a greenshoe of Rs.1 billion; and will invest in greenfield residential projects.
ArthVeda Star Fund will be invested in middle income housing projects (Rs.1.5-4 million per unit), with 75% of its investment in 16 tier-II and tier III cities and metro outskirts across India. The projects will be sold at prices ranging from Rs.2,000 to Rs.4,000 per sq. ft. The investment ticket size of the fund deployment will be between Rs.50 million and Rs.200 million with an investment duration of 24-36 months and a maximum extension of 18-24 months.
The fund aims to invest in equity or equity like instruments in Special Purpose Vehicles (SPVs), having an active control of each SPV with an ownership of between 51% up to 75%.
Commenting on the launch of ArthVeda Star Fund, the second real estate fund, Bikram Sen, CEO, ArthVeda Fund Management said, “Considering the high potential demand in middle income housing segment in tier II and tier III cities in India, we have launched ArthVeda Star Fund that will offer domestic institutions and high net-worth individuals an opportunity to invest in smaller markets in India, leveraging DHFL group’s expertise.”
“Our first real estate fund has made 6 exits with IRRs ranging from 20% to 45% and is currently invested in 7 projects. With ArthVeda Star Fund, we expect nearly 30% returns from our investments,” he added.
The strong lending expertise of DHFL, gives an edge to ArthVeda Star Fund to deliver high returns with low risks to the investors. DHFL has been India’s pioneer in mid-income housing finance (Rs.1.5-4 million per unit) and low-income housing finance (Rs.4-15 lakh per unit) with its presence in more than 175 locations throughout India, especially in tier II and tier III cities. These credit skills and knowledge of local markets of the parent brand – DHFL, will be leveraged by AVFM through ArthVeda Star, while executing its plans to invest in 16 tier-II and tier III cities and metro outskirts across India.
ArthVeda Star Fund will not invest in any of the group companies of DHFL.
ArthVeda Star will leverage on DHFL’s presence to expand its capability to monitor projects of local developers and mitigate investment risks, as it will be strongly backed by the technical expertise of over 527 employees of DHFL in the targeted 16 cities.
Considering the past performance of AVFM in real estate investments, the company expects to target 30% returns in its investments through ArthVeda Star Fund.
Going forward, AVFM plans to launch funds across six business segments-real estate, infrastructure, private equity (PE), listed companies, debt and trading markets. AVFM is in initial talks of acquiring one existing infrastructure fund.
ArthVeda Fund Management had commenced operations in 2005-06 as DHFL Venture Capital. The company raised its first fund (Rs.1,010 million), the DREAM Fund-1, in 2006-07 and has had one of the best performances in its peer group of real estate investment funds. It has so far made 6 exits with IRRs ranging from 20% to 45%. It has provided investment returns of about Rs.340 million to investors and also returned capital of Rs.80 million so far. Currently, about Rs.930 million is still invested in 7 projects. These are currently valued at Rs.1,330 million based on mark-to-market and have a projected valued of Rs.1,750 million.
