Piramal Enterprises (PEL) has formed a strategic partnership with Ivanhoé Cambridge, a real estate subsidiary of CDPQ (Caisse de dépôt et placement du Québec), for investments into residential sector in India. Ivanhoé Cambridge will be allocating an initial $250 million for the same. PEL will commit an additional amount alongside and co-invest between 25% and 50% of each transaction, a statement from Piramal said. The investments will be made in residential projects in Mumbai Metropolitan Region, Delhi (NCR), Bangalore, Pune and Chennai.
Ajay Piramal, chairman, Piramal Enterprises said, “Given the scale of our existing real estate offering and roster of existing developer relationships, the partnership will enable us to execute on very compelling opportunities to deliver high quality residential developments in the local markets that we service.”
The availability of equity capital in the early stages of the development cycle has increasingly become difficult for developers, which is where PEL and CDPQ see an opportunity. A slowdown in sales has impacted the cash flows of developers and increased their reliance on debt and structured means of financing, also shrinking the availability of growth capital. With bank financing not available for purchase of land and early-stage capital, demand for equity is high.
Khushru Jijina, managing director, Piramal Fund Management said that the timing is opportune for the provision of both pure and preferred equity capital at an early stage in the project life cycle. “This alliance is consistent with our philosophy of acting as a perpetual provider of capital. We believe such equity funding with Tier 1 development partners will enable us to deploy capital over a longer time horizon and facilitate participation in larger projects with the ability to generate returns across real estate cycles.”
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Michael Sabia, president and chief executive officer, CDPQ, said: “India represents a key market for our global growth. We look forward to a long-term and fruitful business relationship with Piramal in the years to come.”
Piramal has forged several similar long-term partnerships with foreign investors for investments into real estate. PEL, through its arm Piramal Fund Management (PFM) has strategic alliances with top global funds such as APG Asset Management, Bain Capital Credit and CPPIB Credit Investment Inc. It provides financing solutions to real estate companies.
The structured finance group of PFM also provides senior and mezzanine growth capital to various businesses across varied sectors in India. The total funds under management under these businesses are $4.4 billion.