Piramal in talks to raise $300-m offshore fund

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Mumbai | Published: April 7, 2015 1:20:08 AM

Piramal Fund Management (PFM), part of the Ajay Piramal-owned Piramal Group, is in early talks with sovereign...

Piramal Fund Management (PFM), part of the Ajay Piramal-owned Piramal Group, is in early talks with sovereign and pension funds to
raise a $300-350 million (up to Rs 2,200 crore) offshore fund on the private equity (PE) platform.

This is separate from the $150 million that Piramal is in the process of raising from overseas limited partners (LP) as part of its offshore fund-raising. Of the $150 million, the company has already raised $50 million from LPs.

Khushru Jijina, managing director, Piramal Fund Management, told Fe that the strategy will ensure capital availability for a longer duration as he was expecting a revival in demand for equity investments by realty developers. “We are looking at this mainly for having long term 8-10 year money,” Jijina said.

In February 2014, Piramal signed a joint venture for $500 million with Canada Pension Plan Investment Board (CPPIB) to offer rupee debt funding to residential projects in Mumbai, Delhi, the National Capital Region, Chennai, Pune and Bangalore. Both the entities made an initial commitment of $250 million each.

The details of the partnership for the PE platform are yet to be worked out.

In FY15, 85% of PFM’s loan book was committed as debt and equity investments were in the range of 10-15%. PFM closed FY15 with a loan book of Rs 4,400 crore, which grew more than two-fold from Rs 1,900 crore in FY14. However, Jijina said the firm expects the portion of equity investments to rise up to 40% in FY16.

“Investments made as pure equity across real estate have come down significantly over the last few years. While we will still not call it a revival, developers have again started looking for equity money mostly to buy land, which gives us hope of a healthier equity investments portfolio in the new financial year,” Jijina said.

Originally, Indiareit, as the PE platform of Piramal was called, had a target of raising $500 million through an offshore fund. The target was later pruned to $350 million and thereafter to $250 million in the early part of 2014. It was again cut to $150 million in the latter half of last year.

Foreign investors’s apathy towards India has seen little overseas money getting raised by India-focused real estate funds in the last few years.

Economic uncertainties, policy paralysis, few exits and a weakening rupee kept overseas investors at bay.

However, after the formation of a stable government at the Centre and hopes of a revival in the economy, investors’ view of India has improved, says Anuj Puri, chairman and country head, Jones Lang LaSalle India. Puri says that foreign investors are again keen on investing in India, but the terms of investing are undergoing a change. Overseas investors are now asking for more say in the investments made by fund managers.

“Instead of putting the investible money in a pool, foreign investors now want to create a separate account and want the fund manager to take approvals from them before investing in a project,” Puri said. From the investors’ point of view, they get greater say in the investment while for the manager it means more long-term money and firepower to invest, he added.

Meanwhile, during the year, Piramal plans to raise its second redevelopment fund worth Rs 500 crore, Mumbai Redevelopment Fund II, from domestic investors, as it did in its first redevelopment fund raised in 2013. The company plans to target both slum redevelopment and society redevelopment projects through this. “We are hoping to launch the fund by June,” Jijina said.

PFM is the integrated entity formed last year after Piramal Enterprises’ financial services arm, Piramal Capital, combined Indiareit and its real estate and allied sectors’ focused NBFC under a single vertical. This entity is now mandated to invest in real estate across the capital spectrum through private equity, structured/mezzanine equity, structured debt, senior secured debt and construction finance.

Real plans
* Jijina says the strategy will ensure capital availability for a longer duration as he expects a revival in demand for equity investments by realty developers
* The details of the partnership for the PE platform are yet to be worked out
* He said developers have again started looking for equity money mostly to buy land, which gives the fund hopes of a healthier equity investments portfolio in the new financial year
* Anuj Puri, chairman and country head, Jones Lang LaSalle India, says foreign investors are again keen on India, but the terms of investing are undergoing a change.

They are asking for a greater say in fund managers’ calls

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