Piramal Fund Management, which is essentially a real estate-focused investment arm of Piramal Enterprises, has added a new strategy to deploy capital to select existing development partners. The firm said it would allow the select few to draw from a pre-sanctioned limit like a pre-approved loan for consumer loan, a move that would allow borrowers to get funds quicker.
Christened as Piramal Preferred Partner, the programme intends to commit an amount of Rs 15,000 crore in the first phase to a select group of existing investee partners.
Khushru Jijina, managing director, Piramal Fund Management, said, “This is a concept that was borne out of the relationship driven approach that we have always exhibited with our development partners. We were already prevalent across the entire capital stack and able to act as a perpetual provider of capital for multiple projects. By offering this facility, our development partners will always be able to demonstrate a competitive advantage against their peer group.”
Under this platform too, funding will be available across the entire suite - right from early stage equity to senior secured debt/construction finance and even a structured bulk purchase of individual units.
“We will continue to do what we do. However, in the last few months we have started seeing consolidation in certain markets. I see some of my top, Grade A developers come to me for urgent requirement of money to buy distressed assets and in some cases, distressed developers want to forge joint venture/joint development agreements – this is where the concept has originated from,” Jijina told VCCircle.
The statement added that this facility would be extended to a select list of developers who have already demonstrated both the strength of balance sheet as well as the execution capability required for the intended end use. Jijina refused to share names of these developers but said that the two pre-conditions for selection would be – they have to be Grade A developers and should have received at least two rounds of financing from Piramal Fund Management’s platform.
The limit itself would also be arrived at keeping in mind various other organisations and project specific parameters and would be reset on a periodic basis. The platform will issue a letter of credit to select partners with a pre-determined corpus which can be availed across debt, equity and structured finance.
“This puts our developers in a preferred position in this situation as compared to others. In the first phase, we will be issuing letters of credit to eight-ten developers and limit will be reviewed every six months to factor in performance,” said Jijina.
Developers can use capital across both commercial and residential asset classes. However, residential will get capital in all the forms starting from equity to construction finance while the platform will restrict its exposure to commercial to debt.
Piramal recently announced that it will be backing commercial projects as well and aims to deploy Rs 5,000 crore across key markets like Mumbai and Bengaluru. Leasing in office space has picked up significantly with 2015 wrapping up on a high note.
Meanwhile, with this move, Piramal will also cut down on sanction time significantly. “This is an important point of the strategy. Developers don’t have to go to multiple institutions to explore opportunity and since they are preferred partners, sanction will also be fast tracked,” said Jijina.
The corpus will go from the firm's proprietary book. Two years ago, Piramal had merged its real estate private equity business with realty-focused NBFC—Piramal Finance—to create Piramal Fund Management.