Piramal arm, Future Capital finance Mumbai realty firm

Ajay Piramal-promoted Piramal Healthcare and Kishore Biyani's Future Capital have invested Rs 310 crore in Mumbai-based real estate developer Rustomjee Group.

Piramal Healthcare and its non-banking finance arm, PHL Finance, have subscribed secured non-convertible debentures worth Rs 110 crore, issued by the operating entities of the group, while Future Capital has subscribed debentures worth Rs 200 crore, said a person in the know

The group has, so far, drawn Rs 60 crore from Piramal and Rs 100 crore from Future Capital, sources said. When contacted, Rustomjee Group spokesperson confirmed the deal, but did not elaborate.

The funds will go towards project financing and buying out its investor in three of its projects, said sources. Last Year, Rustomjee gave exit options to the investors.

"Today, the cost of private equity is definitely higher than that of debt. If you are sure the value of the equity is higher than what I am paying for (in a buyout from PE), you go ahead,” an executive of Rustomjee had said recently.

Finance from non-bank financial companies (NBFC) is gaining ground in real estate, especially in providing exits to private equity firms and project financing.

According to property consultant Jones Lang LaSalle, of the $ 3 billion (Rs 15,000 crore) exits by PEs, 67 per cent of exit had been done through promoter buy backs aided by NBFC funds. Due to their increasing role, the NBFC funding rates have shot up from 15 to 16 per cent in 2010 to 19-22 per cent in 2011. "With flexibility in usage in funds and with over 20 active players, NBFCs are the principal means of finance for buybacks," JLL said.

Recently, the Lodha Group gave exit options to Deutsche Bank by repaying Rs 2,542 crore to the German bank. The exit was financed by Rs 1,720 crore from internal accruals and Rs 825 crore through fresh borrowing. In another deal, Xander Finance, the non-banking finance arm of global investment firm Xander Group has invested Rs 70 crore in a retail and office project of Mumbai-based Ajmera group.

Xander’s investment is structured as secured non-convertible debt. The project named Times Square has 850,000 square feet of retail and office area and located at Andheri east of Mumbai.