Piramal Capital, part of Ajay Piramal-owned Piramal Enterprises. The firm aims to fund infrastructure projects of over $100 m and has recently made its first investments of over R1,000 crore in two separate transactionsR550 crore in a subsidiary of Hyderabad-based Navayuga Engineering Company, and another R500 crore in Green Infra, a wind IPP backed by IDFC Private Equity. Jayesh Desai, head (investments), Piramal Enterprises Ltd, speaks to Shubhra Tandon of FE about Structured Investments and opportunities that lie ahead for the company in the infrastructure space. Edited excerpts:
What is Piramal Structured Investments
We are a pure and simple provider of last-mile equity. There are a lot of projects where the last mile needs to be crossed, for either want of capital or some other issue. Lots of projects are three-fourths complete and are stuck for want of capital. So, even if the execution side is taken care of, the capital problem exists. We provide intermediate or mezzanine capital. We look to provide capital that can help people complete projects or keep them going.
So are you looking at distressed assets
Not necessarily. Distressed situations are inherently difficult situations. We look at situations where there is a capital requirement. People started out in their optimism in the late part of the last decade with various projects thinking that can raise equity, but they could not. So, these projects need equity at this point in time and we are providing that.
What is your investment horizon like and targets for FY14
We consciously try not to set targets and that is what distinguishes us from a fund. We are investing straight from the prop (proprietary) book. So we are not limited by our size, but only by opportunities that exist. We have got cash of R10,000 crore to R12,000 crore. If an investment opportunity presents itself of that size, we can invest up to that size too, in the next five-seven years.
What challenges do you face as an investor in the infrastructure sector, where most projects are burdened by high debt and slow execution
We believe that availability of good projects outweighs bad projects. The execution challenges have always existed, but the biggest challenge that exists is the lack of capital.
But most projects faced capital challenges due to slack execution in the first place, isnt it
I would reiterate that execution challenges, land acquisition, approval delays and the like were always there. But if you look at our infrastructure companies, the reality is that nobody has internal capital, nobody has raised enough equity to be able to finance the kind of projects they are talking about. Take for example a power project of 1,300 MW, it would require at least R2,000 crore of equity capital. Which company balance sheet has it today Similar is the case with the roads sector. So in good days there was a belief that we had unlimited capital, whether its the IPO market or private equity investors, which has clearly not worked.
Since the market is full of such companies, how do you identify your potential investees
We essentially look at just the project, assuming that our capital is enough to kick start three project with a medium- to long-term horizon, generating enough cash flow to pay us back.