IL&FS launches $248m Indian fund, plans $1bn fund

The Mumbai-based publicly listed private equity arm of Infrastructure Leasing and Financial Services has partnered with Milestone Capital Partners for a real estate fund, as it plans to launch a larger $1bn fund in October.

IL&FS Investment Managers, the publicly listed private equity arm of finance company Infrastructure Leasing & Financial Services, has partnered with Milestone Capital Advisors to launch a real estate investment fund to raise Rs 1,000 crore ($248 million, €178 million), to invest in leased or rented properties.

The fund is just the latest as foreign and domestic firms continue to raise real estate vehicles hoping to cash in on India’s fast expanding economy. However, they come amid concern that too much investment is being pumped into properties with no income.

The fund, IL&FS-Milestone Fund-I, will have a lifespan of four years and it may be listed after three years. Milestone Managing Director Ved Prakash Arya told reporters in India that the firms will take two months to raise the money and 12 months to deploy it.

Ayra said: “This fund is for people who are risk-averse. We would not invest in under-developed or under-construction properties. For us to invest, the property has to be there and it has to be occupied and should be under lease or rent.”

The fund will target office buildings, hospitals, hotels, warehouses and shopping malls, with 30 percent each in retail and office properties, 20 percent in IT and 10 percent warehousing.

At the same time, reports in India say that IL&FS is close to launching a $1 billion real estate fund, with a launch date in October. The fund, which will likely be called IL&FS Realty Fund-II, would be the second such fund for the firm. The first, IL&FS Realty Fund, was launched in April of last year and is mandated to invest in equity-related instruments of Indian Companies operating in the real estate sector. With a corpus of over $525 million, the fund is now fully invested.

The firm declined to comment on the proximity of the closing, but it has already informed its current shareholders about its intentions to launch a second fund. Sources at the firm said the life span of the fund would be eight years and it will be registered in Mauritius, according to reports.

The firm’s first fund is seeking a gross investment-level leveraged annual internal rate of return in excess of 25 percent. In addition, the fund is targeting a cash-on-cash stabilized yield on equity exceeding eight percent per annum for income-generating projects

IL&FS Investment Managers is one of India’s largest domestic private equity fund management companies, managing over $1 billion on behalf of leading Indian and international institutions. IIML presently manages funds focused on investments across infrastructure, real estate, life sciences, manufacturing, information technology and consumer services.

This year many India-dedicated funds have been launched. In August the Mumbai-based Housing Development Finance Corporation (HDFC) closed on a new $800 million (€587 million) fund that will invest in Indian real estate on behalf of 28 foreign investors. Also in August, 3i Group launched a $1 billion (€740 million) fund to invest in the rapidly growing Indian infrastructure market. And in June, Bahrain-based Khaleej Finance and Investment (KFI) partnered with two Kuwait-based investors to manage and promote a $200 million (€149 million) fund that will target real estate and industry in India.