Piramal Fund Management has agreed to invest Rs 2,320 crore ($346 million) across a bunch of projects of Mumbai-based privately held developer Lodha Group, in one of the biggest debt transactions in India’s real estate market.
Lodha Group will use the money raised from the real estate investment platform of Piramal Enterprises Ltd to replace existing debt, the companies said in a statement.
The billionaire Ajay Piramal-controlled company will get periodic coupon payments while an escrow of receivables will also be set up as part of a mechanism to secure the investment, the statement said.
The funding will enable Lodha to complete and deliver marquee projects in south and central Mumbai that are at various stages of construction. It will also reduce the cost of debt for the developer.
“This transaction demonstrates our ability and willingness to scale our financing relationships with our choice of partners and stands testament to the marketing and execution track record demonstrated by Lodha Group,†said Khushru Jijina, managing director at Piramal Fund Management.
Abhishek Lodha, managing director at Lodha Group, said the company is seeing momentum building up in its business with sales, deliveries and collections all moving up. “This transaction will further strengthen our balance sheet and give us room to further improve our growth,†he said.
This is the second investment by Piramal Fund in Lodha Group’s projects. In May this year, the investment firm had put in Rs 425 crore ($63 million) in an ongoing residential project of the developer in central Mumbai.
Lodha Group, one of the biggest developers in India, recorded gross sales of Rs 8,000 crore in 2015-16 and aims to touch Rs 10,000 crore this financial year. It is developing an estimated 43 million sq ft of prime real estate across 28 projects in Mumbai, Pune, Hyderabad, Bengaluru and London.
Debt funding has dominated deals in the real estate sector over the past many quarters, as a slowdown in sales force developers to rely on multiple rounds of refinancing to finish construction of projects and stay afloat in the market. A total of $1.6 billion money flowed into India’s real estate sector in the first half of 2016, a major portion of which came through debt and structured debt transactions from PE firms and non-banking finance companies, according to VCCEdge, the research platform of News Corp VCCircle.
Piramal Fund provides capital across the spectrum, starting from early-stage equity to late-stage debt and construction finance. Positioned as a perpetual provider of capital for real estate projects, it recently created a 'Piramal Preferred Partner' platform under which development partners can draw from a pre-sanctioned credit limit.
The investment firm has added plotted developments and commercial projects to its investment horizon. It has been aggressively sealing deals in real estate, with some of its recent transactions being with Bengaluru-based Habitat Ventures and Noida-based The 3C Company and ATS Greens.
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