Investors To Lose Money As Real Estate Fund Of Aditya Birla Sun Life AMC Fails To Find Exit

Investors stand to lose money as Aditya Birla Sun Life Asset Management Company Ltd. is looking to liquidate its realty fund by the end of next month after failing to secure an exit from eight of its investments in a tight property market.

Aditya Birla Realty Fund-1 was launched in 2010 and though it had a fixed-term of six years, the managers extended its life twice for one year each, Akshat Pandya, head of real estate investment advisory at the asset manager, said in a letter to investors—BloombergQuint has reviewed a copy. The extended life of the fund ended on Aug. 31 last year.

At the time of launch, the fund raised around Rs 1,056 crore from investors. It managed to return Rs 601 crore or 57 percent of the initial investment to its investors to date, the letter said. But with the net-asset value of the fund at 0.89x as on March, as per an independent valuation, investors are likely to lose their principal.

Structural changes brought about by the Goods and Services Tax regime and the Real Estate (Regulation and Development) Act have hampered demand and absorption levels in the sector. A liquidity crisis, which has hurt non-banking financial companies the worst, has added stress and as a result buyers have turned extremely cautious, he said.

If the fund cannot liquidate its investment by the end of July, it will attempt to do so by Aug. 31, Pandya said.

So far, the asset manager has successfully exited from four of its investments and received 98 percent of its dues from another. There were originally 13 investments when the fund was launched.

The letter said that the realty fund cannot secure an exit for eight and is reaching out to various market participants.

The fund had secured refinancing facilities for four of its investments but the deals could not materialise due to multiple reasons, including the ensuing systemic-liquidity issues, according to the letter.