Piramal bets big on real estate sector

Ever since Ajay Piramal sold his drug formulation venture to Abbott five years ago for $3.7 billion, he had set his eyes on real estate and financial service businesses as the next big bets. On Tuesday, he gave fresh impetus to his ambitions by floating a ₹15,000 crore fund aimed at financing real estate developers.

This comes even as reports suggest that Piramal is looking to turn venture capitalist in a bid to ride the start-up wave. But with the real estate sector remaining flat for the past few years and the start-up economy ridden with uncertainty Piramal’s bets may look risky.

Under the new programme called ‘Piramal Preferred Partner’, Piramal Fund Management, an arm of Piramal Enterprises Ltd, will allow selected existing development partners to draw from a pre-sanctioned limit to pursue acquisitions.

Though the company declined to name the developers, Piramal Fund Management has previously invested in developers like Omkar and Century Real Estate, among others.

“The market has been consolidating in the last couple of months. Developers have been undertaking joint development and also sealing deals in the real estate sector. Our effort is to give a fillip to such deals for developers who can go ahead without worry,” Khushru Jijina, Managing Director, Piramal Fund Management, told BusinessLine .

Jijina said the platform is capable of extending early-stage equity, senior secured debt/construction finance and even a structured bulk purchase of individual units.

“The corpus will be entirely from our balance sheet,” he said, adding that during the first phase, the company will be tying up with 8-10 leading developers in the top five markets.

“We will be looking at developers with whom we already have existing development partnerships,” he said.

As a result of our pre-approved limits, the developers will be able to close their choice of transactions much faster, Jijina said, adding that the company will be renewing the commitments and performances in next six months.

He said once the company closed its first phase, it will look at the second set of developers.

Asked whether the funding will be for residential or commercial developers, Jijina said the company was eyeing developers who had large exposures in the residential segment.

According to India Ratings and Research report, real estate companies have resorted to refinancing of debt through higher-cost funding from non-banking finance companies/private investors.

This extends maturity and reduces the pressure on them to reduce prices to liquidate inventory and repay debt.

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