Goldman Sachs invests $150M in Piramal Realty

Financial services giant Goldman Sachs has invested $150 million (Rs 978 crore) to buy a minority stake in Piramal Realty, the privately held real estate arm of Ajay Piramal-led diversified firm Piramal Enterprises Ltd, the company said on Monday.

The proceeds would be used to expand the company’s current real estate portfolio and acquire prime properties in and around Mumbai.

Anand Piramal, executive director, Piramal Group, said, “Goldman Sachs has helped develop some of the world’s finest buildings. Their experience and expertise will further inspire us to build world-class developments in India and achieve the highest standards of design, technology, quality, execution and customer service.”

Ankur Sahu, co-head of private equity, Goldman Sachs in Asia, said, “The government's focus on simplifying regulation and boosting economic growth will kick start investment and consumption. Under such a cyclical recovery, the demand for high-quality, modern housing and office space from a trusted, proven brand and standard-setting developer will serve to create a significant leader in Indian real estate.”

This is the second entity level deal for the realtor within a month. In July, Warburg Pincus agreed to pump in Rs 1,800 crore ($283.6 million) to buy a minority stake in the company. The deal had pegged the privately held realtor as the sixth-most valued realty firm behind DLF, Oberoi Realty, Prestige Estate, Godrej Properties in the listed space and Lodha Developers among peers in the private domain.

Most of the deals in real estate have moved to special purpose vehicle (SPV) level transactions post the global financial crisis. However, there has been some movement at entity level lately. Last year, Tata Opportunities Fund invested Rs 468 crore at holding level in South-based developer Shriram Properties. In the listed space, Oberoi Realty recently got Rs 324.5 crore from Singapore government owned investment firm Temasek.

Early this year, Goldman Sachs and Creador picked up stake in North-based Ashiana Housing through a qualified institutional placement.

The expansion plans of Piramal come at a time when real estate market is going through a slowdown. Sales have gone down pushing up inventory or unsold stock levels manifold.

As of now, Piramal Realty has over 10 million square feet of commercial and residential projects under development in prime areas of Mumbai, such as Byculla, BKC, Mulund, Thane and Worli. In the coming quarters, it is looking at lunching Piramal Vaikunth in Thane, a mixed-use complex designed by HOK and spread across 34 acres.

Meanwhile, the company has announced a special scheme for home buyers under 'Piramal Assurance'. As per the plan, the company will offer to buy back any residential unit from a customer at a five per cent discount to the market value until possession if a buyer is not satisfied.

What is interesting is even when real estate market is going through a slump, private capital has continued to flow in. In the first half of 2015, real estate attracted $1.3 billion against $892.81 million in the first half of 2014, according to VCCEdge, the data research platform of VCCircle

As for Goldman Sachs, it recently signed a platform deal with Bangalore based Nitesh Estates to jointly deploy $250 million in income-generating commercial assets. In an equity deal, it invested Rs 255 crore ($40 million) in Vatika Hotels, the hospitality arm of Gurgaon-based developer Vatika Group.

It also picked up a small stake in North-based Ashiana Housing for Rs 100 crore. 

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