K Raheja Corp unit may sell stake worth up to $500m

Mumbai: K Raheja Corp has quietly rolled out a process to divest a minority stake in its income-yielding commercial real estate unit. The privately held, Mumbai-headquartered developer has mandated JM Financial and Morgan Stanley for a share sale process, possibly raising up to $500 million, people directly familiar with the matter said.

The billionaire Chandru Raheja-led company is among the top three owners of tenanted offices - after DLF and Blackstone Group - with 20 million sq ft space in Mumbai, Pune and Hyderabad. The potential transaction could value the office space portfolio, now branded Mindspace, at around $2 billion. K Raheja Corp, with siblings Neel and Ravi in charge of operational management, could divest around 25% stake in the unit, one of the sources cited earlier added.

A second source said the company could divest between 15-20% stake, pegging the fund-raising at $300-500 million. When contacted, a K Raheja Corp spokesperson declined to comment on market speculation.

The stake sale move is a bit surprising since K Raheja Corp had done significant work towards a REIT listing of the commercial unit. The stake sale process is likely to attract a lineup of foreign investors, though some of the big investors in Indian real estate may shy away from the minority shares being offered.

Recent media reports said the company was investing Rs 2,000 crore to build a 6-million-sq-ft office space after investing in land parcels in Navi Mumbai and Pune. K Raheja could also deploy a part of the fund-raise for inorganic growth in markets like Hyderabad and Chennai.

India's grade-A office space market is pegged at 400 million sq ft, with fresh annual absorptions estimated at around 32 million sq ft, making it one of the most buoyant markets in the world.

K Raheja Corp's strong portfolio of commercial assets has insulated Mumbai's heavyweight developer from the sluggish residential sales in recent years.