Bengaluru: Piramal Fund Management Pvt. Ltd is set to investRs.200 crore in Omkar Realtors and Developers Ltd’s Dhobi Ghat slum redevelopment project in Mumbai through the portfolio management services (PMS) route, said a top fund executive.
Piramal Fund will invest equity capital at an early stage of the Dhobi Ghat project, a century-old, open-air laundry over seven acres of prime land in south Mumbai’s Mahalaxmi that houses about 7,000 slum dwellers. The capital will be used for the rehabilitation process and to pay for project clearances and approvals.
Having finished deploying its latest Indiareit Domestic Scheme V—a Rs.1,000 crore residential fund—Piramal Fund is now tapping the PMS route to raise capital. It is doing single transactions under a discretionary PMS route in the domestic market today, and approaching its large pool of high-networth investors on a project-by-project basis.
“We have adopted this strategy where instead of raising capital in a blind pool form, here, if we like a project, we take it to investors for approval and raise the capital. After Dhobi Ghat, we have lined up two more projects where we want to invest in a similar manner,” said managing director Khushru Jijina.
Omkar Realtors has undertaken the Dhobi Ghat project almost a decade after an agreement was signed between another developer and the Slum Redevelopment Authority (SRA).
After obtaining the majority consent of slum dwellers, Omkar Realtors now plans to launch the project early next year.
“We are in the process to relocate the first 950 people to transit accommodation. We are planning a residential development on the site, and once the project is launched, it should take about three years for construction,” said Gaurav Gupta, director, Omkar Realty.
While Piramal Fund will continue to invest through the PMS route, it will go on to raise its next domestic fund in the coming months, Jijina said
“Doing transactions through the PMS structure allows a fund house to tap an additional source of HNI (high-networth individual) pool, who can co-invest on a project-to-project basis. Unlike an AIF-structured fund which is a blind pool where investors rely primarily on the fund’s ability to generate returns from a portfolio across the Fund life, a PMS scheme gives greater discretion to investors,” said Shouvik Purkayastha, executive director and head, capital markets, Cushman and Wakefield India, a property advisory.
PMS is a collective pool of investments handled by a portfolio manager. In an AIF or alternate investment fund structure in real estate, investments below Rs.1 crore from individual investors are not allowed. A number of real estate funds are either being raised or are deploying capital under the AIF norms including Piramal Fund Management’s series of funds.
Increasingly, investors are looking at the co-invest route more favourably compared with a blindpool one, where the fund manager has the final say on the kind of project investments that are made.
From Indiareit Domestic Scheme IV, a Rs.922 crore residential fund that was raised in 2010, Piramal is charting its first full exit from Omkar Realtors’ luxury project, Omkar 1973, in Worli, Mumbai. It had invested around Rs.200 crore in 2011 and will be exiting with an internal rate of return of 24%.
“By December, we aim to make a total of two full exits and four partial exits, and return 75% of the capital back to investors and aim at an IRR of 22% on a portfolio level,” Jijina said.
Earlier this year, Piramal Fund Management also invested Rs.1,200 crore as project-specific debt in Omkar’s Worli project in one of the largest single project financing transactions in India.
Piramal’s newest Rs.1,000 crore Fund V has been deployed across 11 transactions across Mumbai, Pune, Bengaluru and the national capital region. These commitments were made over an 18-month period, between September 2013 and March 2015.
The last three investments from the fund, which got concluded in March, were all in Bengaluru.