Reality grows on them

CONVENTIONAL WISDOM says that in times of economic turmoil, it’s best to invest in land. And Asit and Sameer Koticha, co-founders of ASK group, believe in it; ASK Property Investment Advisors, their real estate private equity fund, has been one of the few success stories in this space.

Most real estate biggies, such as DLF and Unitech, have seen a steep fall in sales and several PE firms such as Canada-based SITQ and South Africa-based FirstRand have scaled down operations in India. But ASK Property Investment Advisors has been successfully raising money from domestic high net worth individuals, wealth management, and private banking channels.

Asit Koticha, also chairman of the group, began the fund after some of his real estate investments gave him huge returns. In 2005, he invested some of his personal wealth in 10 parcels of land in prime areas of Mumbai. They were to be redeveloped into residential and commercial properties. Soon after, land prices started to soar; in three years, prices trebled. Asit Koticha had hit the trail of a real estate boom, and realised the potential of real estate investment. The unregulated nature of the business with its landmine of self-made rules was no deterrent.

The ASK real estate PE fund raised its first tranche of Rs 340 crore in 2009, when there were signs of an economic revival after the Lehman Brothers collapse the previous year. In the second half of 2010, it floated a second fund and raised Rs 521 crore in tough market conditions by June 2011. In the third week of June this year, the fund raised a further Rs 480 crore. The company met with early success when its first investment of Rs 50 crore returned Rs 121 crore in March.

The key to ASK’s real estate success has been Sunil Rohokale, who was recently appointed managing director and CEO of ASK Investment Holdings, the holding company that oversees the group’s various businesses. Rohokale earned his spurs at ICICI, where he built a huge home mortgage business.

Along with Amit Bhagat, also an ex-ICICI executive and now CEO of ASK Property Investment Advisors, he laid down some guidelines for ASK’s real estate investments. Unlike large investors, they don’t put money in listed firms and holding companies, but in midsize residential projects (5 acres to 15 acres) in five cities. Prices range from Rs 4,000 to Rs 6,000 a square foot and have a three-year investment horizon.

Rohokale’s target is to take the ASK group’s assets under management (AUM) from the present Rs 8,000 crore to Rs 1 lakh crore. He derives the optimism from the recent successes of their real estate fund. Besides overseeing the recent tie-up between ASK group and Pravi Capital, a PE business started by ex-bankers to invest in small and medium companies that are not involved in real estate, he is planning to float an offshore fund of $250 million (Rs 1,425.3 crore) in Singapore for ASK Property Investment Advisors.

For the ASK group, this is the second time in a decade that it has seen a big rise in its fortunes. In 2002, the brothers hired Bharat Shah from Birla Mutual Fund. Shah’s investment calls had resulted in Birla’s Advantage Fund crossing an AUM of Rs 1,000 crore. At ASK, Shah heads the portfolio management service (PMS) for ultra-high net worth individuals. In 2006, when the Indian economy picked up, the AUM of the PMS rose to Rs 2,500 crore, putting it in the top five schemes in this category.

“We are creating an owner-manager model to attract top talent to our businesses,” says Asit Koticha. Both Rohokale and Shah have stakes in the holding company. With stiff competition in the wealth management space from ICICI, Barclays, Kotak, and India Infoline, Rohokale and Shah will be expected to drive their businesses. Once more, the Kotichas seem to be relying on conventional wisdom: A person with a vested interest in a company will ensure that it profits.