Anand Piramal, executive director of Piramal Group, at his office in Mumbai (Pic: Suryakant Niwate) Piramal Realty, the real estate development arm of Piramal Group, on Tuesday said global private equity investor Warburg Pincus will pick up a minority stake in the company for Rs 1,800 crore. Anand Piramal, executive director of Piramal Group and son of group chairman Ajay Piramal, spoke to Raghavendra Kamath about the company’s strategy. Edited excerpts:
Why did you choose to raise money at the entity level, given Piramal Group has a lot of surplus cash?
Cash is (just) one part. We are building great business. Warbug Pincus has invested in Piramal Healthcare, Bharti and HDFC and provides growth capital. If you want to do well in real estate, you need to do joint development, but returns are not high. Real estate is a capital-intensive business; hence we took capital from them. As a group, we like to do business with partners, who give us much more than capital — expertise, etc.
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You are launching new projects at a time when Mumbai’s real estate sector is down in the dumps and is expected to remain subdued in the next two years. How will you tackle the challenges?
The group like ours has holding power. We do not need to sell to keep our head high. We will launch projects when the time is right. We will get premium for the quality and experience our projects provide. If you want to build a great institution, real estate is a good place. If there are 20 companies in the pharma sector, which are above $1 billion, in real estate there is only one, DLF, which has a valuation of $3 billion. There is an opportunity to build a company of good scale and size here as well.
So, do you want to build a $1-billion company?
We would like to build a much bigger institution than a $1-billion company. But we are focused on making a difference to the company and add to the progress of the nation.
What is the USP of your projects? How will you make them different from others?
We have some of the best architects working for us: SOM, Foster, HOK. We want to make our projects as good as anywhere in the world. We have hired former chief executive officer (CEO) of Tishman Speyers Rakesh Sharma. Shiju Bhaskar, formerly with Emaar, joined us. Robert Booth (former CEO of Emaar) spends three days a month here. He is trying to bring in international standards. ...Also, we are studying what customers want and trying to provide that. All the projects are community driven.
A recent report by Ambit said real estate prices have fallen 8 to 18 per cent and will fall further. What is your take on that?
I do not see prices falling too dramatically. There are not too many good projects. If you are a good developer and have good quality and standards, you will command a premium.
How are you coping with frequent changes in development plans, real estate policies and so on?
Will you move beyond Mumbai?
It (real estate) is a local game. Concentrating on one city makes more sense.
Some people say there is a confusion in the group’s real estate strategy given that you have both fund management and development business. Your comments…
Piramal Fund Management is part of a listed entity and does debt and equity deals. Piramal Realty is into development business and a separate private company. So there is no conflict of interests.
We (Piramal Realty) have not taken a single rupee debt from Piramal Fund Management. If there was conflict of interests, global investors such as CPPIB, Warburg Pincus would not have invested with us.
Analysts say you take a long time in launching projects.
We do not launch projects unless we get all the approvals and the last few years were slow in getting approvals. Also, markets were bad. Once all approvals come in, we will launch them.