Ajay Piramal seeks hedge funds' help to rescue half-built homes

Bloomberg July 14 | Updated on July 14, 2020 Published on July 14, 2020

Piramal Enterprises Ltd scouts for new investors to help raise cash and fund working capital for the real estate projects it lends

Piramal Enterprises Ltd is seeking new investors including hedge funds to help raise cash and fund working capital for the real estate projects it lends to so they don’t languish half built.

The firm controlled by billionaire Ajay Piramal is looking to bring in investors alongside its real estate-focused shadow bank unit to help complete projects, said Khushru Jijina, Managing Director of Piramal Capital & Housing Finance Ltd. The focus is on developers the lender has already provided loans to, Jijina said in an interview.

India’s real estate market is grappling with a lingering lockdown that’s slowed construction and sharply crimped new sales in an already struggling market. Developers have been leaning on lenders like Piramal to fund the cash needed to complete partly-built projects to bridge funding gaps resulting from a lack of revenue.

“Bringing in the right co-investor will allow a continued flow of working capital to the developer, which will in turn ensure that the project is completed and our asset quality is conserved,” Jijina said. “We do not want a partner who will only be interested in outright buyouts and then just leave.”

NBFC sector woes

Piramal forecasts having to fund as much as ₹1,500 crore ($200 million) in working capital to developers to finish projects assuming the firms’ repayments to it are negligible due to the coronavirus outbreak.

Incomplete projects risk straining shadow bank balance sheets further. The sector was struggling even before the virus pandemic. The collapse of Infrastructure Leasing & Financial Services Ltd in 2018 triggered a credit crisis that has since claimed other victims including Dewan Housing Finance Ltd and Altico Capital India Ltd., another real estate lender.

India’s lockdown has only amplified the troubles, as the nation is projected to tilt into its first economic contraction in decades.

Piramal has raised as much as ₹8,000 crore in the financial year from April 2020 through debt sales. Combined with its ₹4,000 crore in cash at the end of March, this will enable Piramal to keep funding its developers, while also paying back the ₹10,000-crore debt due in the six months ending September, Jijina said.

In addition, Piramal is accelerating a push to diversify its loan book, by trimming the share of its bigger loans. The lender is also aiming to cut debt, including by paying it down with funds raised by improving collections from its borrowers.

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Published on July 14, 2020
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