Page 38 - Kolte Patil AR 2019-20

#6 Greater ownership
We increased our economic interest in the landmark Life Republic property
In the business of real estate, a cash-light approach by construction companies is achieved through the divestment of project ownership in favour of external companies. During the year under review, Kolte-Patil reversed this industry approach through the buyout of equity ownership by external holders in Life Republic, its landmark project, sending out an unmistakable signal of commitment, prospects and profitability
Overview
During the year under review, Kolte-Patil completed the ownership of 95% all economic interest in Life Republic to enhance ownership and profits from property development and shareholder value.
This buyout sends out signals: that KPDL is optimistic of development prospects, believes that the property has acquired critical maturity for accelerated development, returns could
far exceed returns from treasury operations (assuming that the Company’s financial resources were retained in cash) and there is attractive revenue visibility from this project.
Fine print
KPDL entered into a share purchase agreement to buy-out the 50% stake held by
India Advantage Fund-III (IAF-III) and India Advantage Fund-IV (IAF-IV) managed by ICICI Venture Funds Management Company Limited (ICICI Venture) in the flagship Life Republic township project.
The buy-out consideration was of C210 Crore to be paid in three tranches of C70 Crore each. Two tranches have already been paid largely through internal accruals. The third tranche shall be paid in FY21. Besides, 12 acres of land in Life Republic, with FSI required to achieve the saleable area equivalent to 1.4 million square feet, will be allocated to IAF III and IAF IV (managed by ICICI Venture) upon the project obtaining an FSI of 1.0 (present 0.5).
In a decisive post-Balance Sheet development (April, 2020), the Company undertook strategic
36 | Kolte-Patil Developers Limited