Mumbai: Piramal Fund Management Pvt. Ltd, part of Piramal Capital, the financial services unit of Piramal Enterprises Ltd, is set to launch a $250 million (about Rs.1,600 crore) platform with a pension fund to undertake equity investments in residential projects, said a senior executive of the fund while declining to name the partner.
The tie-up, to be announced in the next three months, will be the second venture through which Piramal Fund Management is bringing in global pension money.
In February 2014, Piramal Fund launched a $500 million platform with Canadian Pension Plan Investment Board (CPPIB) to provide debt financing to residential real estate firms. The venture has completed only one transaction so far, investing Rs.110 crore in Gurgaon-based project of Advance India Projects Ltd.
The real estate-focused lender and investor, which merged its real estate private equity and non-banking financial company (NBFC) in 2014, says it will rely on its own balance sheet to fund investments through these ventures and only selectively tap limited partners for capital.
“Our main strategy is that nearly 80-90% of our business will come from our balance sheet. Having said that, we don’t want to be away from the market also. So, you will see us coming to the market to raise a Rs.500 crore fund for redevelopment,” said Khushru Jijina, managing director at Piramal Fund Management.
According to Jijina, the fund house had total assets under management (AUM) of Rs.23,000 crore, including debt and equity, as on 31 March.
The firm, which had earlier invested aggressively through preferred equity investments, structured debt and mezzanine debt, has increased its tilt towards construction finance over the past two years.
“In 2014, we continued with structured debt, but from October 2014, we shifted gears. We started doing construction finance, our AUM then was roughly Rs.4,300 crore and 6% of that was construction finance. Now, out of roughly Rs.11,000 crore in debt investments, 40% is construction finance,” said Jijina.
The construction finance unit will look at lending to residential and commercial real estate projects.
As lending picks up, Piramal is simultaneously eyeing exits. The fund is yet to fully return capital from its Vintage Fund III raised in 2007. While most of the capital raised for this fund has been returned, it is yet to liquidate some investments in Hyderabad.
Another fund—Domestic Fund Scheme IV—which raised Rs.919 crore in 2010, is also in the midst of exits. It has returned Rs.371 crore. The fund will cease to exist in 2017. Additionally, Piramal Fund Management has also returned Rs.241 crore from its Rs.500 crore Indiareit Mumbai Redevelopment Fund, raised in August 2013.
Apart from its own funds, it was mandated to manage third-party capital of India Infoline Wealth Management Ltd in January 2014. India Infoline Wealth Management, the wealth management arm of financial services firm India Infoline, had raised Rs.771 crore as part of a new fund and Piramal Fund Management has till date returned Rs.442 crore or 55% of the invested capital.
As per data from financial research platform VCCEdge, private equity funds invested nearly $2.77 billion in real estate projects and companies across 81 deals in 2015 as against $2.1 billion in 2014 through 90 deals.
In the first three months of the year, the real estate funds have invested about $410 million in residential, office and retail projects, the data showed.
“You look at the scale of India and the change that has happened; people have started seeing India as not much of a risk. So global investors from Asia, from the Middle-East and North America are looking to invest in India and for some of them their investment base in the country will broaden,” Jeremy Waters, head of international capital markets at global property consultant Knight Frank, told Mint on 2 April.