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Piramal Fund Management invests Rs425 crore in Lodha’s Mumbai project

The deal has been structured as a fixed-return, debt investment with periodic coupon payments and has an appropriate security mechanism in place, including hard asset cover as well as escrow of receivables. Photo: Hemant Mishra/MintPremium
The deal has been structured as a fixed-return, debt investment with periodic coupon payments and has an appropriate security mechanism in place, including hard asset cover as well as escrow of receivables. Photo: Hemant Mishra/Mint

The investment is towards construction of premium residences being developed by Lodha Developers in a project with more than 5 lakh sq.ft of saleable area

Bengaluru: Piramal Fund Management Pvt. Ltd has invested 425 crore in a central Mumbai project constructed by Lodha Developers Pvt. Ltd through the structured debt route.

This is the first time Lodha, the country’s largest developer in terms of sales, has raised money from Piramal Fund Management, one of the largest real estate investors in the country.

The investment is towards the construction of premium residences in a project called Lodha Azzuro with more than 500,000 square feet of saleable area. The project, 40% of which is already sold, is under construction.

Lodha Azzuro is a recently launched project in Mumbai’s Parel area, where the residential units are priced at about 25,000 per sq. ft.

“This is our first structured deal with the realty developer. We look forward to deepening our ties as we evaluate their portfolio of projects," said Khushru Jijina, managing director, Piramal Fund Management.

The deal has been structured as a fixed-return, debt investment with periodic coupon payments and has an appropriate security mechanism in place, including hard asset cover as well as escrow of receivables.

Piramal Fund Management is fast emerging as one of the largest and most aggressive real estate investors, with loan book and equity investments worth 22,000 crore in the residential space alone.

In February this year, Piramal Fund said it will pre-sanction a 15,000 crore funding limit to back about eight to ten existing developer partners in Mumbai, Bengaluru, Pune, Chennai and National Capital Region through a new scheme called the Piramal Preferred Partners.

Under this scheme, Piramal Fund will enter into investment partnerships with a few property firms, some of its existing partners and a few new ones, and commit about $250-300 million to each of them, which it will disburse as and when the developer brings a deal to the table.

“We are pleased with Piramal Fund Management’s decision to invest with us, given the experience, scale and depth of their financing platform. We are constantly looking to grow our pool of credible funding partners and look forward to a long-term relationship with them," said Abhishek Lodha, managing director, Lodha Group.

Last week, Moody’s Investors Service downgraded the corporate family rating of Lodha Developers as well as the senior unsecured debt rating of the $200 million dollar-denominated bonds issued by Lodha Developers International Ltd.

Mumbai-based Lodha Developers generated operating sales of 6,430 crore in 2015-16 against Moody’s expectation of 9,000 to 9,300 crore. The realty firm’s cash collections of 6,200 crore during the year were higher than last year’s collection by 14% but were lower than Moody’s expectation of 7,500-8,000 crore for fiscal 2016, the report said.

Real estate funds invested about $410 million in residential, office-space and retail projects between January and March this year, compared with about $680 million in the corresponding period last year, according to VCCEdge, which tracks investments, and Mint research.

Debt and debt-structured transactions have been the most preferred route for investments in real estate over the last three years and property analysts have been hoping that equity capital into projects, which generate better returns and is a long-term commitment, returns to the sector as it headed towards gradual recovery.

“As of now, debt seems to occupy a major chunk of investments in real estate and we are seeing different kinds of structured debt products in the market today. The real estate development cycle needs to bounce back to normalcy—for equity deals to come back and for investors to take that risk in or to commit equity capital," said Shashank Jain, partner, transaction services, at consultancy PricewaterhouseCoopers India.

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