Piramal Enterprises Ltd. (PEL) has entered into a strategic alliance with CPPIB Credit Investments Inc., a wholly-owned subsidiary of Canada Pension Plan Investment Board (CPPIB). The alliance will provide rupee debt financing to residential projects across India’s major urban centres. Both companies have initially committed $250 million for the purpose.
Addressing a press conference, Ajay Piramal, Chairman, Piramal Enterprises, said, “This is one of the largest single cheques into the sector. It is an opportune time to be creating an aligned pool of capital to target what we believe to be very compelling financing opportunities in the real estate sector”.
The investment focus would include providing project-level debt financing to top tier, local developers with a strong track record in delivering high-quality residential projects, he said. The focus will be on residential developments in Mumbai, Delhi NCR, Bangalore, Pune and Chennai.
“We will look at debt instruments in the residential space. There are enough opportunities in debt financing and mezzanine debt funding in the long-term that we could do in the future. There are other areas people are interested in partnering with us and we are exploring those,’’ he said.
On the rationale for the venture, Mr. Piramal said that today there was a demand for debt. “Most banks are not allowed to fund real estate developers and the IPO (initial public offering) market for real estate is dead. The only source of funding for real estate developers is are non-banking finance company (NBFCs) like ours and we bring significant value to the table for a developer with our experience and access to funds. The average ticket size of projects we will consider could be Rs.100 crore plus. We will charge a premium to market rates.’’
