Piramal Enterprises to offer long-term equity in real estate sector

Piramal Enterprises Ltd (PEL) has entered into a strategic partnership with Ivanhoé Cambridge, a real estate subsidiary of Canada-based Caisse de dépôt et placement du Québec (CDPQ), to provide long-term equity capital to blue chip residential developers across the five major metro cities in India.

Ivanhoé Cambridge is allocating an initial $250 million for this, while PEL will commit an additional amount alongside and co-invest between 25 per cent and 50 per cent of each transaction.

''Given the scale of our existing real estate offering and roster of existing developer relationships, the partnership will enable us to execute on very compelling opportunities to deliver high quality residential developments in the local markets that we service,'' said Ajay Piramal, chairman, PEL.

There is a strong demand for equity in the capital stack as blue chip real estate developers increasingly prefer the option of partnering with investors in the early stages of the development life cycle over high cost financing. Naturally, the capital will be made available to a selective list of Grade A developers who have already demonstrated a track record of execution capability, corporate governance and strong return potential.

The investment focus shall include the Mumbai Metropolitan Region, Delhi (NCR), Bangalore, Pune and Chennai.

''This alliance with Ivanhoé Cambridge is consistent with our philosophy of acting as a perpetual provider of capital and underlines the confidence reposed by institutional investors time and again in our abilities as a fiduciary. We believe that the timing is opportune for the provision of both pure and preferred equity capital at an early stage in the project life cycle. Such equity funding with Tier 1 development partners will enable us to deploy capital over a longer time horizon and facilitate participation in larger projects with the ability to generate returns across real estate cycles,'' Khushru Jijina, managing director, Piramal Fund Management said.

Diversified PEL has presence in pharma, healthcare information management and financial services, and recorded revenues were $1 billion in FY2016, with 61 per cent of revenues from outside India.

Michael Sabia, president and CEO, CDPQ, said, ''India represents a key market for our global growth.''