Runwal Group, Warburg Pincus form JV for retail mall platform

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Published: May 21, 2019 7:18:42 AM

Runwal group on Monday signed a joint venture deal with an affiliate of global private equity firm Warburg Pincus to launch a retail mall platform across tier 1, tier 2 and tier 3 cities in India.

This investment would mark the first mall asset being backed by Warburg in India.This investment would mark the first mall asset being backed by Warburg in India.

Runwal group on Monday signed a joint venture deal with an affiliate of global private equity firm Warburg Pincus to launch a retail mall platform across tier 1, tier 2 and tier 3 cities in India.

An investment of `2,794.24 crore is committed with an equal contribution by both partners to develop institutional grade shopping malls. The parties would further raise around `4,191 crore as debt to create a corpus of nearly `6,986 crore ($1 billion).

Warburg Pincus India managing director Anish Saraf said, “With growing middle class and expansion of branded retail, shopping malls present a meaningful opportunity to participate in India’s consumption story. Along with Runwal group, which has strong retail knowledge and operational experience, and our ability to support the creation of leading enterprises in the market, this JV will enable us to benefit from India’s long term growth potential”.

This investment would mark the first mall asset being backed by Warburg in India.

According to a report by Anarock Capital, the private equity inflow in retail jumped to over $1.2 billion (about `7,735.2 crore) between 2017 and 2018, and $600 million (about `3,927 crore) between 2015 and 2016.

Anarock Capital MD and CEO Shobbit Agarwal said that unlike the commercial office sector, retail is geography-agnostic to some extent as its success depends on the spending power of the target audience. As a result, shopping malls in tier 2 and tier 3 cities have led to an increase in rentals and profitability of developers and caused PE investors to consider investments options other than tier 1 cities, he added.

The organised retail is expected to see an addition of around 39 million sq ft between 2019 and 2022. Of this supply, approximately 71% of retail space will be added in tier 1 cities and the remaining 29% in tier 2 and 3 cities.

Runwal group MD Sandeep Runwal said, “This strategic partnership will benefit from the country’s rapidly growing retail sector at a time when mall penetration across Indian cities is still very low”. The group is planning to build large destination malls as well as smaller hypermarket and cinema-anchored community malls.

“Malls in several countries around the world have transformed from pure shopping areas into social, community and entertainment centres. We would capitalise on this trend and provide a high-quality experience for all tenants and customers,” Runwal further added.

When asked about the investment plans in tier 2 and 3 cities, Runwal group CEO Sanjay Daga said that the decision would be made as per the land parcel available along with a study on the growing disposable income of their consumers in those cities. The group would also look to acquire both greenfields as well as brownfield projects.

Currently, the real estate group has four malls in Mumbai with a total leasable area of approximately 2 million sq ft, which includes the flagship R City Mall in Ghatkopar with 1.2 million sq ft of retail space.

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