Warburg Pincus to invest $284M in Piramal Realty

Private equity major Warburg Pincus is pumping in Rs 1,800 crore ($283.6 million) to buy a minority stake through an affiliate in Piramal Realty, the real estate arm of Ajay Piramal-led diversified firm Piramal Enterprises Ltd, it said on Tuesday.

The deal values privately held Piramal Realty 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.

The proceeds will used to expand the portfolio of the company and acquire land in and around Mumbai. The portfolio of the developer is restricted to Mumbai with projects in Mumbai, Navi Mumbai and Thane. Founded in 2011, the developer has over 10 million square feet under development in Byculla, Thane, Worli, BKC and Mulund.

Piramal Realty is separate from Peninsula Land, which is under Ashok Piramal Group that separated from Ajay Piramal-led Piramal Enterprises several years ago.

"Warburg Pincus invests in companies with high growth potential and believes that Piramal Realty is best positioned to achieve leadership in one of the world's most attractive real estate markets," Niten Malhan, co-head India, Warburg Pincus.

Ajay Piramal, chairman, Piramal Group, said, “Warburg Pincus’ investment and expertise will raise the level of real estate in India to international standards, as it has done in other industries such as telecom, financial services and pharmaceuticals.” 

This is the first deal of Warburg Pincus in a pure play real estate company and also one of the biggest transactions in Indian real estate in the recent past.

More importantly, it is the single biggest bet in India by the marquee PE firm in local currency terms and just short of what it had put in Bharti Airtel in dollar terms over a decade ago in two tranches.

It is also the second significant deal by Warburg Pincus in India this year after it put in $133 million in Ecom Express, a logistics firm focused on the e-commerce sector.

What is unusual about the transaction is that it breaks away from the typical deal structure in the realty sector where private investors back specific projects of property developers.

In the last one year or so, investment activity at entity level has gained some momentum. Recently, Singapore government owned investment firm Temasek put in Rs 324.5 crore in Oberoi Realty at the holding level. Prior to that, South-based developer Shriram Properties raised funding of Rs 468 crore from Tata Opportunities Fund late last year.

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

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.

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