Piramal in JV talks with CDPQ arm for realty PE fund

Joint venture to set up fund with corpus of $250 million

After announcing its plans for housing loans and small and medium enterprise finance, the Ajay Piramal-controlled financial services arm, Piramal Finance, is giving final touches to a joint venture (JV) in real estate private equity. And, might follow with a new corpus in  the infrastructure investment platform this year.
 
Piramal Finance is set to sign a JV this month with Ivanhoe Cambridge, real estate arm of Canada’s second largest pension fund manager CDPQ, said a source in the know. This JV will provide equity capital to developers and the corpus would be around $250 million (Rs 1,700 crore), says the source.

 
This would help Piramal expand its offering, as it has its own proprietary book lending and a JV with Canadian pension fund manager CPPIB. This will help Ivanhoe to re-enter Indian real estate.
 

Ivanhoe opened an office in the country in 2008 to invest in malls and shopping centres but shut it as it could not find the right opportunities.
 
Its CDPQ parent already opened an India office earlier this year and appointed World Bank executive Anita Marangoly George as South Asia head. It has committed Rs 1,000 crore for energy sector.
 
Though Piramal and CPPIB announced a $500-million JV to provide debt to developers in early 2014, this is moving slowly, given the fall in yields in Indian property markets, said the source quoted earlier.

 
A Piramal spokesperson said: “We don’t comment on market speculation.”
 
An Ivanhoe Cambridge spokesman said: “We do not comment on rumours or speculations about our investments. As we have said before, we are actively looking into opportunities in India but have nothing to confirm at this time.”
 
According to sources, Piramal could also go for new fundraising with Dutch pension fund manager APG, to raise a new corpus in infrastructure investment platform, both set up in mid-2014. The initial corpus was $750 million and the plan was to take it to $1 billion.
 
Piramal and APG said they would invest in local infrastructure firms through rupee-denominated mezzanine instruments. Mezzanine financing is basically debt capital that gives the lender the rights to convert to an ownership or equity interest in the company if the loan is not paid back in time and in full.

 
Piramal and APG initially committed $375 million for investments under the alliance. “The duo have almost exhausted the corpus and now are talking to raise a new fund,” said the source in the know.
 
When contacted, an APG spokesperson said, “We prefer not to comment at this point.”
 
Early last year, the duo invested $132 million (Rs 900 crore) in Essel Green Energy, the solar power venture of Essel Infra.
 
“Both are upbeat on infra investments in the country. The minimum ticket size was $75 million and hence they could exhaust within three years,” the source said.

 
Piramal is one of the most aggressive lenders to real estate and has done lending of about Rs 20,000 crore to developers, mainly developers in top cities. Besides, prop book lending, it does deals through its PE funds, JVs with other global investors.
 
Piramal plans to launch housing finance firm in four months and target self-employed people and affordable housing projects. It has formed a platform called emerging corporate loan group which will lend to small and medium firms.