Mumbai-based Piramal Realty, led by Ajay Piramal, is believed to be divesting some stake as it looks to raise Rs 800-900 crore, three people familiar with the development said.
Sources said talks with US-based private equity (PE) fund Warburg Pincus were in the final stage although the deal has not been closed yet. The company has been in talks with prominent foreign funds for the stake sale, including Goldman Sachs, as FE had reported earlier.
Piramal Realty responded to an emailed query by FE saying it did not comment on market speculation. Warburg Pincus did not reply.
FE could not immediately ascertain the amount of stake that Piramal Realty was looking to divest.
If the deal with Warburg Pincus fructifies, it will mark Warburg’s foray into the Indian real estate sector.
The investment will be made through a special purpose vehicle (SPV), which will hold four of Piramal Realty’s assets. These include marquee parcels, including a seven-acre plot in Byculla, which the company bought from textile major Mafatlal industries. Also included is a prime one-acre plot that Piramal Realty bought from Hindustan Unilever in 2012. The other two land parcels are in Kurla and Thane, said sources. The company is planning residential projects at each of these plots, they added.
The fact that large funds are looking to partner developers is being read as a sign of optimism by industry experts. But according to
Anuj Puri, chairman and country head at JLL India, this is not going to be an industry-wide trend.
“Overseas funds are taking an active interest (to invest in the Indian real estate sector) but in select companies,” said Puri. Piramal Realty is a reputed company with assets in profitable locations and a good corporate governance track record, which is why it can attract the attention of global PE funds, he added.
Ajay Piramal embarked on his real estate venture in late 2010, after selling out Piramal’s branded generic business to Abbott Laboratories. According to the company’s website, since then, the company has spent roughly Rs 4,100 crore in acquring prime assets, mainly in central and suburban Mumbai. Collectively, the company has 12
million sq ft under-construction projects.
Other firms that have raised capital through overseas PE funds recently include Godrej Properties, Brigade Enterprises and Nitesh Estates.
Moreover, such large sums have not been invested in Indian realty since 2008-09. Right after the economic crisis, triggered by the collapse of Lehman Brothers in September 2008, PE transactions in the domestic real estate sector had shrunk, not only in numbers but also in ticket size.
“Making a large investment into a company definitely displays a high-risk taking ability” Sunil Rohokale, chief executive and managing director at ASK group, said.
“Large investments are being made because even though fundamentals are distressed, global funds are taking a position in companies and projects, in which
they forsee profits.” added Rohokale.