India: Piramal Finance invests $62.2m in Prateek Group project

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Piramal Finance Pvt. Ltd has lent Rs425 crore to Noida-based Prateek Group to repay existing loans and complete construction of a township project in the National Capital Region (NCR), top officials of both companies said.

Prateek will use the money to pay off existing loans to Xander Finance Pvt. Ltd and a couple of banks, and complete construction of Prateek Grand City near Ghaziabad. The developer has already sold 2.2 million sq. ft of the 10 million sq. ft project.

Last year, Piramal had invested Rs200 crore in Prateek Group’s luxury residential project Edifice in Noida in a late-stage deal.

“We have been more cautious about investing in NCR compared to Mumbai and Bengaluru and our strategy has been to work with a few partners, with whom we do repeat deals. We are happy with the sales performance of the Edifice project and the overall track record of the developer, which prompted us to do a second deal,’ said Khushru Jijina, managing director, Piramal Finance.

Property consultancy Cushman and Wakefield was the advisor to this transaction.

The Ghaziabad project has residential units priced at Rs 30-80 lakh. It was earlier funded by Xander Finance, a non-banking financial company (NBFC) of The Xander Group Inc.

“With this investment, Xander Finance and a couple of other banks will exit. The project has been doing well, and though there was some impact of demonetisation on sales, it seems to be picking up again,” said Prashant Tiwari, chairman, Prateek Group.

Piramal started lending for project construction in 2015 as a new line of business, in addition to private equity investing and debt financing. It mainly looks at projects which are a combination of late-stage, mid-market residential developments in both city-centric and suburban locations as well as commercial office projects.

“Though we started less than two years ago, construction finance constitutes 52% of Piramal Finance’s lending portfolio today and it will only grow,” said Jijina.

On Tuesday, Mint reported that in a second round of restructuring of its financial services business, Piramal Enterprises Ltd (PEL) has moved all assets and liabilities related to lending to real estate and non-real estate projects to its NBFC Piramal Finance. Piramal Finance currently has an overall loan book of Rs19,170 crore.

The real estate slowdown over the past three years has impacted India’s largest property market, NCR, the most. However, Ghaziabad, followed by Noida, have performed better compared to other micro markets such as Gurgaon and Faridabad, said analysts.

“Developers will continue to raise construction finance this year as they want to focus on completing their projects. With the new realty law becoming a reality soon, project execution will be a focus area as developers need to finish projects on time,” said Rajeev Bairathi, executive director and head of capital markets at Knight Frank India.

Also Read:

India: Piramal Enterprises to set up housing finance firm

Piramal Fund to finance Indian office, retail assets

This article was first published on Livemint.com