Following the announcement of its intention to enter the construction finance space in Q3 FY15, Piramal Fund Management recently announced that it had approved nine construction finance proposals totalling Rs.1,100 crore, a company release said.
The initial transaction volume is spread across Mumbai, Delhi NCR, Bengaluru, Pune and Chennai, with projects located in micro markets with robust demand fundamentals. The funds have been earmarked across a combination of late stage, mid-market residential developments in both city centric as well as suburban locations. In one instance, funds are also intended for construction of a brown-field commercial office development. These facilities range from three to five years each, with a sufficient principal moratorium period to allow the project cash-flows to stabilise.
Piramal Fund Management said it was capable of catering to the entire capital stack – right from early stage equity to late stage debt and now construction finance and was therefore able to act as a perpetual provider of capital within this space. Typically, structured equity or structured debt investments would often get refinanced by banks or other NBFCs once the projects would achieve certain milestones; with construction finance, the platform is able to extend the overall tenure of their relationship with a project by not requiring the development partner to refinance once the project matures.
Khushru Jijina, Managing Director, Piramal Fund Management, said, “With construction finance, we have consciously completed the last remaining element in our suite of product offerings. This makes sense for our platform as well as for our development partners as we are now able to further our engagement with them and fund the entire project life. We are looking at many more such investments where the developers are experienced, projects are profitable and de-risked, and our investment is ring fenced.”
Piramal Enterprises Ltd is one of India’s large diversified companies, with a presence in healthcare, healthcare information management and financial services. PEL’s consolidated revenues were $750 million in FY14, with approximately 70 per cent of revenues from outside India.
In financial services, PEL, through its Piramal Fund Management division, provides comprehensive financing solutions to real estate companies. Its Structured Investments Division invests in various sectors including infrastructure. The total funds under management under these businesses are around $2 billion. The company also has strategic alliances with top global pension funds like CPPIB Credit Investment, Inc. and APG Asset Management. PEL has also made long-term equity investments of around $1 billion in Shriram Group, a leading financial conglomerate in India.