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Up to 400 cr of Piramal Indiareit V Fund's assets stuck in talks, tribunals

Piramal Indiareit Fund Scheme V has been unable to make exits from 4 out of the 10 real estate projects that it had invested in. (Mint)Premium
Piramal Indiareit Fund Scheme V has been unable to make exits from 4 out of the 10 real estate projects that it had invested in. (Mint)

  • Piramal Fund Management said the Fund made 10 investments of which five have been exited completely, with realized IRRs of up to 27%
  • While the fund manager is pursuing a commercial resolution, it is also running a a parallel track within the IBC/NCLT process

Piramal Indiareit Fund Scheme V, a real estate investment fund launched by Piramal Fund Management has only managed to return 600.5 crore out of the 995.4 crore raised by it during its launch in 2013. The balance of almost 400 crore is mostly locked up in negotiations or insolvency proceedings against various developers before the National Company Law Tribunal or proceedings before Debt Recovery Tribunals (DRTs), a communication from the fund manager to investors showed. Last year, the fund asked for an extension to its term of 6 years as Mint wrote here.

The fund has been unable to make exits from 4 out of the 10 real estate projects that it had invested in. These include Darode Jog Homes in Pune, Ashiana Dwellings - Mulberry in Gurgaon, an Ariisto Group project in Mumbai and a Bengaluru project, Bellandur - Address Makers.

"The application under the IBC is still awaited to be listed and the same could not be taken up due to the nationwide lockdown on account of the Covid 19 pandemic," the company stated in its newsletter in reference to the Darode Jog project. "We have also invoked the personal guarantees of the promoters in April 2019 and the matter is still sub judice before the High Court," it added.

With regard to Ashiana Dwellings, the company said that the fund would be ‘pursuing legal options’ since discussions had fallen through. In the case of Ariisto in Mumbai, the company said that the developer has defaulted on borrowings and the lender has initiated proceedings in the Debt Recovery Tribunal (DRT).

“IndiaReit Fund Scheme V with an initial tenure of 6+1+1 years, currently in its final extension year, is due to expire in July 2021. The Fund made 10 investments of which five have been exited completely, with realized IRRs of up to 27%. An outright sale option is being pursued to realize the intrinsic value of the sixth investment, which is held as a parcel of land in Bangalore," Piramal Fund Management said in response to a query from Mint.

“Of the remaining four investments, one has already realized a partial exit. For the remaining three residual assets as well as the balance returns from the partially exited asset, we are pursuing both a commercial resolution as well as the full extent of legal remedies available to us. This is fairly typical in these fund structures and in-line with the security package negotiated at the time of investment," it added. The fund manager went on to repose faith in India’s IBC recovery process. “In fact, for stressed assets, the bankruptcy route provides for a time bound, formal process to extract optimal value from such residual investments. Whilst we continue to concurrently pursue a commercial resolution, a parallel track within the IBC/NCLT process provides for a degree of certainty, even if time-consuming," the Piramal statement said.

"Real estate projects across India, particularly those launched in 2012-13 are in poor shape due declining sales since 2015 combined with the fact that property prices have remained stable if not de-grown," said Shobhit Agarwal, managing director and chief executive, Anarock Capital, a real estate consultancy. "Investors who have money in such funds should not bank upon it for their financial goals. If there are recoveries , consider them a bonus," said Deepali Sen, a mutual fund distributor based in Mumbai.

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