Indian private conglomerate Reliance Industries Group is in talks to acquire a 23.87 percent stake in India’s largest real estate investment management business, Infrastructure Leasing and Finance Company (IL&FS) for approximately $1.2 billion.
According to a report in India’s Economic Times, the stake would be acquired from Orix Corporation, the Japanese financial services company for approximately $1.2 billion.
IL&FS, which through its fund management arm IL&FS Investment Managers, manages both private equity and real estate funds, recently increased assets under management to $3.2 billion following last November’s acquisition of Saffron Asset Advisors.
It is also poised to come to market with a brace of funds, a real estate vehicle and a private equity vehicle, targeting a combined $800 million in capital commitments from investors.
Other businesses under the IL&FS umbrella include IL&FS Engineering, IL&FS Transportation, India’s NOIDA Toll Road and a 41 percent stake in the Delhi Mumbai Industrial Corridor project, a state-sponsored industrial development project.
An investment buy Reliance, which is owned by Indian billionaire Mukesh Ambani, would see it become the second largest shareholder in IL&FS, however some commentators believe it could be a prelude to a larger investment, possibly for a controlling position.
Other then ILG&FS’ Employees Trust, investors in IL&FS include Life Insurance Corporation of India , India home loan provider HDFC, the Central Bank of India and the State Bank of India as well as the Abu Dhabi Investment Authority, the sovereign wealth fund.
One Indian real estate fund manager told PERE Reliance’s history of making investments that give it a “controlling influence” would suggest it could target further investments in IL&FS. He said: “If they buy into Orix’s chunk you can be sure that they will try and accumulate other chunks to the extent that they can.”
But he said: “I can’t see the local players such as the Indian banks selling their stakes. But I think ADIA could be primed for an exit.”