Sundram High Yield Secured Real Estate Fund III

Fund Snapshot

Investment Objective

• The main investment objective of the Sundram High Yield Secured Real Estate Fund III is to undertake activities of a Category II AIF and invest in high yielding debentures and mezzanine securities (including equities), of Indian entities involved with real asset industries that may include (but not limited to) real estate (residential, commercial, retail), logistics (warehouses, supply chain facilities, data centers, etc.), hotels (including hostels, resorts) and healthcare facilities (hospitals, senior care homes, etc.). The investments will predominantly be backed by real estate. The instruments will be secured by monetizable assets, related cash flow streams and corporate guarantees, etc.
• The Sundram High Yield Secured Real Estate Fund III’s investments will mainly focus on de–stressing / de–bottlenecking identified assets / corporate situations via a combination of refinancing existing financiers, last mile funding, rescue financing, acquiring distressed assets and restructuring them with the goal of realizing value and cash from such businesses and companies. The Fund will also seek to acquire portfolios of stressed / distressed assets / secondary debt securities / NCDs from stressed financiers as part of its investment strategy.

Sundram High Yield Secured Real Estate Fund III

A 5-year close-ended fund investing in high yielding debentures and mezzanine securities1 of Indian entities involved with real estate, logistics, hotels and healthcare businesses.

SENIOR SUNDARAM GROUP INVOLVEMENT IN THE BUSINESS – STRONG ACCOUNTABILITY & OVERSIGHT

Harsha Viji (Promoter) currently Executive Vice Chairman, Sundaram Finance heading strategy & capital across the Group. Has actively managed the asset mgt. business as MD of Sundaram AMC. Handled strategy, JVs, new business for over a decade and a total of 21 years of experience including at PwC & McKinsey. Commerce graduate, CA & MBA from Ross, U Michigan.

M Ramaswamy has been with Sundaram Finance for over 30 years in various positions and is currently the CFO handling Treasury, Accounting, Taxation & MIS. On the boards of other Sundaram group companies. Also handles risk management & ALM at SF as well as Sundaram Home Finance. He is CA and was a member of Madras Chamber of Commerce & Industry.

Lakshminarayanan Duraiswamy is MD at Sundaram Home Finance. Prior, he was the COO of Sundaram AMC, He has been associated with the Group since 2009 and has a total experience of nearly three decades in credit, compliance and operations including at Citibank and GE Capital. He is a commerce graduate, qualified Cost Accountant and MBA (Loyola, Chennai).

MARKET ASSESSMENT

Alternate / Private Credit – ‘tip of the Iceberg’

MACRO CREDIT CONTEXT IN INDIA

• India GDP: ~USD 2.5 tn, expected to grow at at least 3–4% over the long–term
  Debt in the Indian economy is ~USD 2.2 tn with a Debt–to–GDP ratio of 0.9x vs over 2.5x for other similar sized economies
• Banks and public debt markets account for ~82% of the debt while NBFCs are ~15% & private capital pools account for the rest – banks are the pre–dominant risk capital in India!
• Structural & ALM crises / management capabilities in NBFCs / HFCs likely to be temporary; LT growth of non–bank space inevitable if there is a free–market approach from RBI
• Regulations already in place to focus banks (the largest capital providers in India) towards social lending, consumer banking & project finance. Hence, NBFCs /HFCs / MFIs have historically grown 15–25% with the regulatory & cultural arbitrage embedded in Indian credit markets

SUB–SECTOR COUNTER TRENDS

• Real Estate (RE) sector credit exposure ~USD 90 bn (~4% of overall debt); active investment in Housing, Infra & other hard assets key to sustained GDP growth => LT investment opportunity
• Ratio of risk capital exactly the opposite in developed markets like EU & USA => private capital / non–bank slated for massive growth LT => multidecadal financing opportunity in India towards alternate assets