Piramal, Altico invest Rs720 crore in Century Real Estate projects
Funds to be used to refinance Century’s loans, construct nine ongoing projects and to make payments for land
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Bengaluru: Piramal Fund Management Pvt. Ltd and Altico Capital India Pvt. Ltd have co-invested about Rs.720 crore across multiple projects of realty firm Century Real Estate Holdings Pvt. Ltd in Bengaluru, in one of the largest structured debt transactions in recent times.
The transaction is in two parts. Piramal and Altico Capital have invested Rs.600 crore in equal measure, and an additional Rs.120 crore has been extended by Piramal as construction finance. The money has primarily been given for a combination of refinancing Century Real Estate’s earlier loans, construction of around nine of its ongoing projects and to make land payments.
“This is an NCD (non-convertible debenture) format loan transaction but with a longer tenor of close to five years which is sufficient time for Century to unlock significant cash flows from its numerous marquee projects across Bengaluru,” said Karthik Athreya, managing director and chief executive at Altico Capital India, a non-banking financial company (NBFC).
“It’s an attractive deal, which promised good risk-adjusted returns, and gives the developer time to develop and generate cash from their projects, and so a win-win situation for both parties,” said Athreya.
This is the second time that Altico Capital (formerly Clearwater Capital Partners Llc) and Piramal Fund Management are co-investors in a transaction.
In 2013, the two financed the acquisition of a land parcel in Chennai by real estate firm VGN Developers Pvt. Ltd to the tune of Rs.300 crore, in a partnership deal.
“It’s a good investment opportunity for two like-minded investors. The deal is also secured and backed by lots of cashflow from various projects,” said Khushru Jijina, managing director, Piramal Fund Management.
With this transaction, Century Real Estate has also refinanced two of its existing investors—Piramal Fund Management, which had earlier put in around Rs.90 crore, has exited and then reinvested again with this deal, and Kotak Realty Fund.
Kotak invested about Rs.170 crore back in 2011, and has now exited with Rs.370 crore—an internal rate of return (IRR) of 20%.
Vikas Chimakurthy, director at Kotak Realty Fund, confirmed the exit.
Century Real Estate has one of the largest landholdings in south India and develops projects both through partnership with other developers and on its own.
It also has a number of plotted developments, which it sells in the form of plots of land to buyers. The firm has 14 projects, including residential and plotted developments, said Century Real Estate’s MD Ravindra Pai.
It is also jointly developing 27 million square feet of projects with various other developers, in which Century’s share is nine million square feet with receivables of about Rs.5,000 crore over a period of five years.
“The real estate market has been slow for some time now, and we are focusing on projects that we have on hand. Despite that, in the last 12 months, we have been able to give exits to various investors,” said Pai.
Structured debt deals are getting bigger in the real estate sector, with both private equity (PE) funds and NBFCs willing to write big cheques to developers, who are raising capital for a host of reasons—refinancing being the most common.
While co-investing is rare, the sector has seen a few such deals in the past. “When two investors come together for a transaction, the due diligence is typically stronger, and there is a sharing of both risks and rewards. However, with two partners, flexibility may be an issue unless there are pre-defined terms and conditions to avoid any ambiguity going forward,” said Ravi Ahuja, executive director at property advisory Cushman and Wakefield India.
Private equity (PE) funds have invested about $2.4 billion in the real estate sector, across 53 transactions, during first nine months of 2015, surpassing the full-year investments of $2.1 billion across 80 deals in 2014, according to data from VCCEdge which tracks investments.
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