Bengaluru: Mumbai-based real estate firm Wadhwa Group has raised ₹ 200 crore from Piramal Fund Management Pvt. Ltd for its 500-acre township at Panvel in Navi Mumbai, people familiar with the development said.
Wadhwa Group, which builds high-end apartments and office buildings, will use some of the money to buy additional land for the yet-to-be launched project and some to give an exit to earlier lender IIFL Group.
In early 2014, IIFL Group’s non-banking financial company (NBFC), India Infoline Finance Ltd, and some of its wealthy clients together bought ₹ 150 crore worth of Wadhwa Group non-convertible debentures (NCD) for the Panvel project.
“The capital was given mainly as acquisition financing and we have exited with good returns," said an IIFL Group executive, who didn’t want to be named.
Vijay Wadhwa, chairman, Wadhwa Group, said the company is attempt is to replace high-cost debt with cheaper capital.
“We will also be buying some additional land for the Panvel project," said Wadhwa.
In 2011, Wadhwa Group signed an agreement with Gulf Finance House for developing the Panvel land owned by the Bahrain-based investment bank. After developing the entire project, Wadhwa Group will give a portion of the built-up or developed area to Gulf Finance House, in addition to an upfront payment already made to the Bahrain bank.
Township developments, which are long-gestation and capital-intensive projects, have had a mixed run in the country so far, with some taking off well and others delayed and cash-starved.
A Piramal Fund Management spokesperson didn’t respond to queries.
The Ajay Piramal Group-backed firm is one of the most active domestic capital providers to real estate today, offering construction finance, equity and structured debt.
In one of the largest single project financing transactions, it committed ₹ 1,200 crore in a luxury residential development of Omkar Realtors and Developers Pvt. Ltd in south Mumbai’s Worli area.
In the past, Wadhwa Group has raised funding from investors such as Kohlberg Kravis Roberts and Co. Lp (KKR), Standard Chartered Bank and Indiabulls Financial Services Ltd, among others.
Developers are raising money from private equity (PE) funds and NBFCs to refinance earlier loans and for growth capital. In projects that are stuck for some reason, and are unable to generate ample cash flows, realty firms are pushed to raise fresh debt.
During January-June, PE funds invested about $1.3 billion in 39 deals, as against $892 million in 31 deals in the same period last year, according to VCC Edge, which tracks investments.
“Developers are raising money actively today, and many of them need to raise for survival, thereby raising new debt to pay off old debt," said Sunil Rohokale, chief executive and managing director of ASK Group, speaking on the overall fundraising scenario.
There are too many lenders in the market, and while there are many opportunities for funding, not all of them are suitable for sustainable lenders, Rohokale said.