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Bengaluru: An affiliate of private equity (PE) firm Warburg Pincus is set to pick up a minority stake in Piramal Realty, the real estate development arm of Piramal Group, for 1,800 crore, in one of the largest single investments in a real estate firm in recent years—and one that seems to suggest a belief in the long-term viability of the Indian real estate sector.

The capital will be primarily used to fund growth and acquire land, Anand Piramal, executive director of Piramal Group, said in a telephone interview.

The company is looking “to buy distressed yet marquee assets in Mumbai, when many developers are cash-strapped and have land that they can’t develop", Piramal explained. “Today, not many have the financial power to buy land worth more than 1,000 crore."

Warburg Pincus’s investment in Piramal Realty comes at a time when sales of residential properties are weak.

Interestingly, the PE firm has invested in the company itself and not in a particular project, as PE firms typically do when it comes to real estate.

“Investing at the entity level demonstrates the high risk-taking ability of Warburg Pincus when most global funds are forming platform- or project-level deals with real estate developers here," said Shashank Jain, partner, transaction services, at PricewaterhouseCoopers India.

That would imply that the PE firm is going long on the real estate market in India, according to another expert.

“This isn’t just a project-level investment, but it means that Warburg Pincus not only believes in the inherent strength and culture of Piramal as a company, but has taken a long-term, mature look at the real estate sector," said Neeraj Bansal, partner and head, real estate and construction, KPMG India.

Founded in 2011, Piramal Realty has a number of projects under development in Mumbai boroughs Byculla, Thane, Worli and Mulund.

Anand Piramal, 31, son of Piramal group chairman
Ajay Piramal, graduated
from Harvard Business School and returned to take charge of the conglomerate’s newest venture.

The company made its first big-ticket acquisition in 2011, when it bought the Mafatlal mill land in Byculla for about 605 crore. However, the slowdown in the years that followed prevented the realty firm from formally launching any of its projects.

“Approvals are expected to come in soon for the Byculla and Thane projects. Though there have been delays, we feel the current government is moving in the right direction," Piramal said.

This is Warburg Pincus’s second investment in Piramal Group, after the buyout firm funded Piramal Healthcare in 1997.

“Warburg Pincus invests in companies with high growth potential and believes that Piramal Realty is best positioned to achieve leadership in one of the world’s most attractive real estate markets," Niten Malhan, co-head of Warburg Pincus in India, said in a statement.

“Piramal Group’s strengths such as its strong values, its track record of creating long-term value for stakeholders, its trusted brand, its ability to recruit great people, its emphasis on customer centricity and its reputation as strong deal makers are some of the reasons why the firm chose to invest in Piramal Realty," Malhan added

The Piramal Realty transaction would be Warburg Pincus’s first major investment in real estate in India, said property consultants.

Till 2011, Warburg Pincus invested mainly in infrastructure and energy-related industries such as Gangavaram Port, ACB (India) Ltd, Continental Warehousing Corp. (Nhava Seva) Ltd and Diligent Power Pvt. Ltd, Mint reported on 20 July.

However, after 2010-11, Warburg Pincus’s portfolio shows a clear inclination towards sectors such as financial services, e-commerce and consumer retail, the report said.

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