Piramal Finance, Ivanhoe may scale up realty investment to $500 million

Within a year of its tie-up with Ivanhoe Cambridge, the real estate arm of Canada’s second-biggest fund manager CDPQ, for a $250 million corpus to invest in residential projects, Piramal Finance, is in talks with it again to scale up the corpus to $500 million, according to sources.

Piramal Finance, the financial services arm of Piramal Enterprises, had in February 2017 entered into a partnership with Ivanhoé Cambridge, to provide long-term equity capital to top residential developers in five Indian cities. Around six to eight investments were to be made by the partners in Mumbai, Bengaluru, Pune, Chennai and the National Capital Region (NCR) centred around Delhi.

Though the corpus was to be deployed in three years time,  sources said the partners expected it to be depleted by June, one-and-a-half-years after its launch.

The capital, which is in the form of a pure and structured equity, has seven-ten year investment horizon.

“There is a huge demand for equity deals from developers. That is the reason Piramal wants to set up a larger corpus along with Ivanhoe," a source said.

When contacted, a Piramal spokesperson said: “We would not like to comment on the issue.” An Ivanhoe spokesperson said: "We do not comment on market speculation."

As part of an early tie-up, Piramal will invest an additional amount and co-invest 25-50 per cent of each transaction. In case of pure equity deals, the ratio will be 25:75, while in the case of structured equity deals, the ratio will be 50:50. The platform will look at returns of over 20 per cent and a minimum investment of ~2 billion.

Piramal’s plans come at a time when its tie-up with Canada Pension Plan Investment Board (CPPIB), Canada’s largest fund manager, has not taken off the way it expected. The two firms had formed a $500-million venture in February 2014 to provide funding for developers of residential projects in top cities such as Mumbai, Delhi, Bengaluru, Pune and Chennai.

For Ivanhoe, the tie-up with Piramal was a return to Indian real estate investment. It had opened an office here earlier but had to shut it down due to lack of opportunities. Its parent CDPQ has opened an office here.

Ivanhoé Cambridge last November appointed Chanakya Chakravarti as managing director, India, growth markets.

Ivanhoe is one of Canada's leading institutional fund managers, and had C$56 billion in assets as of December 31, 2016.