18 June 2019: Three lenders to SARE Homes — KKR India Financial Services, Altico Capital and Edelweiss — are negotiating with potential suitors to either cash out or bring in strategic investors for specific projects to salvage their combined exposure of Rs 900-1,000 crore, two people familiar with the development told ET.
SARE Homes, promoted by London-based global asset and real estate management firm Duet Group, is facing severe cash crunch due to unsold inventory, which has brought construction work to a grinding halt, the sources said.
“This is a unique company…run by professionals,” said one of the persons involved in affairs of the company. “Duet is not on the board of SARE Homes and has no say in the company, and lenders have major says in cash flow.”
Duet had raised $350 million (Rs 1,400 crore then) in 2006 through equity issuance in SARE Public Company (Cyprus). Of this, about Rs 1,000 crore was invested in the Indian firm, SARE Homes, as foreign direct investment.
Spokespersons of KKR, Edelweiss and SARE Homes did not respond to ET’s email queries as of press time Monday.
A spokesperson at Altico Capital said the company currently has only a small exposure to SARE Homes for a plotted development in Chennai. “Given its strong performance and underwriting standards, Altico is in an extremely secure position for its exposure to the SARE project,” she said. Altico has just concluded its annual audit and published accounts with capital ratio more than 40%, cash balances exceeding Rs 1,200 crore and gross non-performing assets of less than 1.8%, she said.
The underlying assets of SARE Homes are much more than the total loan exposures of the three private lenders, the sources said.
As per the last valuation in March 2019, total value of unsold inventory and land is a little over Rs 2,300 crore, as against combined borrowing of less than Rs 1,000 crore, said the official quoted earlier.
SARE Homes has returned a tad below Rs 300 crore to its Cyprus holding company till 2015. But with lenders exploring various strategic options, equity capital is expected to be completely wiped out.
A consortium of KKR and Altico has taken over control of Ramprastha SARE Realty Private, Gurgaon, sources said. Lenders have combined exposure of about Rs 580 crore in the project on a 69-acre plot, of which 52 acres is under development and the rest is yet to be developed, they said. However, an official with one of the lenders said the combined exposure is less than Rs 450 crore.
In addition, Altico has virtually taken control of SARE Realty Project, Chennai GST, a 72-acre plot, of which about half is yet to be developed. Edelweiss has control of SARE Samaag Reality, Ghaziabad, and SARE Jubilee Shelters, Chennai-OMR, sources said.
SARE Homes has launched about 9,000 residential units or flats. Of this, about 6,500 units have been sold, but only about 4,000 units have been offered for delivery. That means 2,500 homebuyers are waiting for delivery and there are another 2,500 unsold inventories. All these 5,000 units will need additional capital to complete.
The company is facing cashflow pressures and cannot raise additional debt.
Categories: General News