Analysis of Lodha Developer’s

Share Buyback
from Deutsche Bank Private Equit

Investment Banking | Professor Vidhu

ShekharGroup 7:
Academic
Daksh Ranawat (254),
Niharika Karnani (196),
Sunav Pandey (150)
Tarini Kumar (231)
Vrajesh Chitalia (158)
June 4th, 2020
Deal Snapshot

Lodha Group was a leading DBPE invested INR 1,640

developer with 27 crore via full convertible
projects. Deutsche Bank debentures (FCDs) & in
through its private equity case of default, DBPE could
arm invested INR 1,640 convert the FCDs to get a
crore in an SPV (Cowtown) 99% stake in Cowtown and
in 2007 its subsidiaries

LODHA DEVELOPERS –
DEUTSCHE BANK
PRIVATE EQUITY DEAL

The SPV (Cowtown) had DBPE transaction was the

three Foreign Direct third PE deal by Lodha
Investment compliant Group. ICICI Venture & JP
projects over 70 acres in Morgan too had invested in a
Thane & Dahisar debt-cum equity deal
Deal Analysis
Deal Rationale & Important Highlights
11
Peak
Peak of
of investments
investments through
through Private
Private Equity
Equity in
in the
the real
real estate
estate in
in 2006-07,
2006-07, they
they were
were heading
heading towards
towards end
end of
of investment
investment
horizon
horizon during
during 2011-2015
2011-2015

22
The deal that Lodha-Deutsche struck was not at all bad in the times when developers were finding it difficult to return
The deal that Lodha-Deutsche struck was not at all bad in the times when developers were finding it difficult to return
capital
capital to
to the
the investors
investors

33
2007
2007 witnessed
witnessed aa boom
boom inin real
real sector
sector which
which encouraged
encouraged many
many FDI
FDI &
& PE
PE investments
investments in
in this
this sector.
sector. However,
However, the
the exit
exit
mode
mode in
in the
the real
real estate
estate sector
sector came
came along
along from
from 2011
2011 to
to 2015
2015

44
Return
Return of
of 55%
55% in
in 44 years
years in
in aa depressed
depressed market
market prompted
prompted Deutsche
Deutsche Bank
Bank PE
PE to
to go
go ahead
ahead with
with the
the deal
deal

55PE Funds find it safer to invest in fixed income generating assets rather than investing in development projects
PE Funds find it safer to invest in fixed income generating assets rather than investing in development projects

66
The deal was the largest FDI in real estate sector. Through this deal, Lodha Group was able to reduce its existing debt
The deal was the largest FDI in real estate sector. Through this deal, Lodha Group was able to reduce its existing debt
Post Deal Analysis
Exit
Exit Analysis
Analysis

 DBPE
DBPE makes
makes aa gain
gain of
of INR
INR 900
900 crore
crore onon an
an investment
investment of of INR
INR 1,640
1,640 crore
crore in
in four
four years.
years. The
The deal
deal generated
generated an
an IRR
IRR of
of 12-13%.
12-13%. Given
Given the
the poor
poor real
real estate
estate
scenario
scenario inin 2011,
2011, IRR
IRR of
of 12-13%
12-13% meant
meant aa good
good exit
exit for
for DBPE
DBPE

 The
The exit
exit was
was financed
financed byby INR
INR 1,725
1,725 crore
crore from
from internal
internal accruals
accruals and
and INR
INR 825
825 crores
crores of
of NCD
NCD issue
issue by
by Lodha
Lodha Developers
Developers

 The
The deal
deal helped
helped Lodha
Lodha deleverage
deleverage itsits balance
balance sheet
sheet & & reduce
reduce debt
debt to
to INR
INR 3000
3000 crores.
crores. Given
Given the
the high
high project
project cash
cash flows,
flows, servicing
servicing such
such debt
debt levels
levels was
was not
not
an issue
an issue

 The RE
The RE industry
industry witnessed
witnessed deals
deals at
at high
high valuations
valuations inin 2007
2007 and
and the
the year
year 2011
2011 saw
saw exits
exits happening.
happening.
Post
Post Deal
Deal Financial
Financial Performance
Performance (Cowtown
(Cowtown Infotech
Infotech &
& Lodha
Lodha Developers)
Developers)
Cowtown Infotech Sales (INR Cr.) Cowtown Infotech EBITDA Margins Lodha Developers Financials
3,334 9,677
4%
8,248 7,926
R: 3 0.5% 3%
6,235
CAG
2%
1,476 2%
722 667 660 1%
516 492 425 1% 1%
724 681 578 794
-1%
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY1 FY1 FY1 FY1 FY1 FY1 FY1 FY1 FY15 FY16 FY17 FY18

Increase
Increase in
in Revenue
Revenue in
in FY18
FY18 due
due to
to acquisition
acquisition Fluctuation
Fluctuation EBITDA
EBITDA margins
margins asas the
the company
company Lodha
Lodha Developers
Developers filed
filed its
its Draft
Draft Red
Red Herring
Herring Prospectus
Prospectus
of
of Muzcovite
Muzcovite Constructions
Constructions Private
Private through
through provided
provided support
support services
services to
to Group
Group in
in 2018
2018 for
for the
the second
second time
time toto raise
raise INR
INR 5,500
5,500 Cr.
Cr.
Cowtown
Cowtown Infotech
Infotech Services
Services Private
Private Limited
Limited companies as and when required
companies as and when required However
However IPO
IPO plans
plans were
were shelved
shelved
The
The company
company paid
paid back
back NCD’s
NCD’s raised
raised in
in 2012
2012 with
with investors
investors including
including Citi,
Citi, Kotak
Kotak Mahindra
Mahindra etc.
etc. in
in 2014
2014
Sources: News Reports and VCCEdge
Thank You