Like banks, Piramal to extend line of credit to developers

Plans to fund Rs 15,000 cr in next couple of months to 8 to 10 developers

Like commercial banks, Piramal Fund Management, part of the Ajay Piramal Group, plans to give ‘line of credit’ to property developers selected by the company.

Piramal plans to fund Rs 15,000 crore in the next couple of months to 8-10 developers under the ‘Piramal Preferred Partner’ programme. The fund manager would give a minimum of Rs 1,000 crore each and the line of credit would not have an upper limit, said Khushru Jijina, managing director.

“We would provide pre-sanctioned limit to our preferred partners in Mumbai, Pune, Chennai, Bengaluru and Delhi national capital region. We can provide equity, debt, structured debt depending on the need,” said Jijina.  If it is a new project, Piramal could give equity with a return target of 20 per cent. If it’s an acquisition, it could give structured debt of 16 per cent for the construction finance.

“The credit line would give the confidence to developers that they have the backing of Piramal and landlords know their partner has Piramal as an investor with them,” Jijina added.

For developers of commercial properties, Piramal would give credit line only with debt and structured debt and not equity for the time being, he said. “In the next 15 days, we will start distributing the letters and we believe the amount will be used in the next 18 months.”

After the first phase of funding in the next three to four months, it would start the second phase and select another eight-odd developers, he added. “The line of credit will give a lot of confidence to residential developers who have a strategy and vision. They can grow their business with the PE (private equity) money,” said Sanjay Dutt, managing director at Cushman & Wakefield.

Piramal Fund Management also plans to form a joint venture with a global sovereign fund to provide equity to developers soon. It has halted all fund-raising plans to facilitate this joint venture and its own lending plans, Jijina said. “We will do a JV and lend own money.” Piramal already has a $500-million JV with Canada Pension Plan Investment Board, for debt lending to housing projects in major cities.
BAILING IT OUT

Rs 15,000 cr
Amount Piramal plans to fund in the next couple of months to 8-10 developers

Rs 1,000 cr each
Minimum amount it would give and the line of credit would not have an upper limit

20 per cent
Return target Piramal could give along with equity