Private equity firm Warburg Pincus has formed an investment platform with Mumbai developer Runwal Group with a total corpus of $1 billion (Rs 6,970 crore) to develop shopping malls.
Warburg Pincus and Runwal Developers Pvt. Ltd will each hold a 50% stake in the platform and commit an equity capital of $200 million each, they said in a statement. The partners will raise another $600 million as debt.
The platform will invest in and develop shopping malls across big and smaller cities in India that have a sizeable population and growing disposable incomes, the statement said.
The platform will not only make large destination malls but also take up smaller format retail centres such as hypermarkets and cinema-anchored community malls. It would also look at acquiring greenfield as well as brownfield projects to expand the platform.
Runwal Group already operates four malls in Mumbai with a total leasable area of about 2 million square feet. This includes its flagship R-City mall in Ghatkopar which has a total leasable area of 1.2 million sq ft.
The platform will be led by Sanjay Dube, who will join as its CEO. Dube was most recently the CEO of Landmark Hospitality (part of Landmark Group). Prior to this, he led Unilever’s operations in central and eastern Europe.
“The retail real estate sector is expected to see tremendous growth going forward driven by lack of community spaces in Indian cities and the growing disposable income resulting in greater spend on entertainment and branded retail,” said Sandeep Runwal, managing director at Runwal Group.
Anish Saraf, managing director at Warburg Pincus India, said that, with a growing middle class and expansion of branded retail, shopping malls present a “meaningful opportunity” to participate in India’s evolving consumption story.
The platform marks Warburg Pincus’ first such tie-up for retail real estate in the country. It has similar platforms in countries such as China, Vietnam and Indonesia.
The PE firm, which has more than $58 billion in assets under management, has exposure to other asset classes in the country. It has a platform with Embassy Group under Embassy Industrial Parks to build and manage warehousing and logistics parks across the country.
It has also backed Asia Pacific-focused logistics developer e-Shang Redwood (ESR), which recently formed a joint venture with Allianz Real Estate to invest $1 billion in the warehousing segment.
In 2015, it had sealed an entity-level deal with Piramal Realty, investing $283 million for a minority stake in the real estate arm of Piramal Group.
Retail real estate
Retail real estate as a theme has been strong in India’s real estate market and has attracted top investors from across the globe. The Phoenix Group, one of India’s top retail real estate developers, has set up a platform with Canada Pension Plan Investment Board to expand its footprint in the segment.
Blackstone, which has one of the biggest portfolio of commercial assets in the country, set up a separate platform under Nexus Malls a few years ago. It is now actively expanding the portfolio by completely or partially acquiring projects.
As per reports, total private equity inflows in the Indian retail sector between 2015-2018 stood at $1.84 bn. Of this, nearly $1.2 bn were pumped in between 2017-2018 alone, showing a marked increase in capital in the last two years.
Smaller cities have particularly been on the radar of PE investors. Cities such as Amritsar, Ahmedabad, Bhubaneshwar, Chandigarh, Indore and Mohali have attracted capital from big global investors.