Mumbai-based Motilal Oswal Group’s alternatives investment arm, Motilal Oswal Alternates (MO Alts), has marked the first close for its latest real estate-focused credit fund, raising more than half of the fund’s new target corpus.
The alternative investment fund (AIF), India Realty Excellence Fund VI, which now has a target corpus of Rs 1,500 crore ($181 million) and a green shoe option of Rs 500 crore, has raised about Rs 1,250 crore for the first close.
Along with the fundraise, MO Alts has also raised the fund’s target corpus from Rs 1,250 crore, while shrinking the greenshoe option from Rs 750 crore, as announced in August last year during the launch of the fund.
For the fundraise, MO Alts has also set up a vehicle in Gujarat’s GIFT City to channel international investments, largely from Middle Eastern investors, even as a majority of its capital has been raised domestically.
The first close was expected by December 2023 but was delayed by a couple of months as the Mumbai-based asset manager was setting up the GIFT City vehicle. The final close is expected in the next six months.
“Given the nature of responses we were getting for the fund, we had to go out and set up another in GIFT City because a lot of NRI investors were actively looking such a product to invest in,” said Saurabh Rathi, one of the co-heads of the real estate platform.
As for deployment, MO Alts plans to close the first transaction from this fund in the next two weeks and has a total of three deals in the advanced stages of talks.
“With tightening restrictions on banks and NBFCs regarding capital usage and a promising outlook for the real estate market, we are strategically positioned to capitalize on emerging opportunities,” said Anand Lakhotia, the second co-head of the real estate platform. “The deal flow looks very promising as we have already built a robust pipeline of investment opportunities across major cities at attractive risk-adjusted yields which are at various stages of evaluation.”
The fund has a mandate to invest in pre-approved or land-stage projects in the residential segment. Geographically, these projects will be placed in India’s top eight residential markets and will offer mezzanine debt to large developers building middle-income housing projects.
The new real estate fund comes about two-and-a-half years after the firm floated its fifth vehicle in January 2021. That fund hit its first close in May 2021 and the second close the following month when it also bumped up the target to Rs 950 crore from 800 crore. The fund eventually closed last year with a corpus of Rs 1,215 crore ($156 million).
The fifth fund has, so far, made 15 investments and clocked three exits at an investment-level internal rate of return of 18.1%. Some of the developers it has funded include Shapoorji Pallonji, Urbanrise – Alliance Group, Marathon, Casagrand, Shriram Properties and Phoenix. Overall, MO Alts has real estate assets under management of over Rs 7,500 crore.
This is the first real estate fund that the firm has launched after the resignation of Sharad Mittal, who was the chief executive of Motilal Oswal’s real estate platform for over a decade. Mittal, who stepped down in July, was replaced by Saurabh Rathi and Anand Lakhotia, who took over as co-heads of the real estate platform.
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