NBFCs support realtors in Mumbai and Bangalore

From Livemint

Bengaluru: Financial services firm IIFL Group has made two large back-to-back investments in real estate projects in Mumbai and Bengaluru to help developers start projects and refinance their existing loans, company executives said.

In the first transaction, IIFL will lend Rs.500 crore in the form of structured debt to Ariisto Realtors, which is building a residential project at Kandivali, a western suburb of Mumbai.

The builder will use some of the money as working capital and the rest to partially refinance loans of existing investors Piramal Fund Management Pvt. Ltd and HDFC Portfolio Management Services, part of HDFC Asset Management Co. Ltd.

Out of the Rs.500 crore, IIFL has already disbursed Rs.370 crore.

This is IIFL’s second deal with Ariisto, after investing Rs.80 crore in 2014.

“This is an early-stage transaction and the project is about to take off,” said Balaji Raghavan, director, IIFL Realty Ltd, a subsidiary of IIFL Group.

Hiren Patel, executive director, Ariisto Realtors, said the company has 19 residential projects in various parts of Mumbai.

“The Kandivali project will have two- and three-bedroom apartments. The project is currently in the process of procuring approvals. We will use the money for project development and to partially repay Piramal and HDFC Portfolio Management Services,” Patel said.

In the second transaction, IIFL and Edelweiss Group, another financial services company, will jointly lend around Rs.725 crore to Bengaluru-based developer and landowner Manyata Promoters. Edelweiss, as the senior lender, will lend about Rs.450 crore and the remaining Rs.275 crore will be given by IIFL.

IIFL Group, through both its non-banking financial arm and its private equity arm, has been an active investor in real estate projects.

In September, the group and some of its wealthy clients invested Rs.300 crore in a real estate project in the western Mumbai suburb of Borivali being developed by Radius Developers, in partnership with Deserve Builders and Developers Ltd.

The IIFL-Edelweiss partnership is yet another instance of investors such as private equity (PE) funds and non-banking financial companies (NBFCs) joining hands for big-ticket transactions while hedging risk in a sluggish market.

Lenders act in a consortium often when a single lender or investor is unable to put up large amounts or wants to distribute risk.

Confirming the transaction, Sanjeev Rastogi, executive vice-president, ECL Finance Ltd, the NBFC arm of Edelweiss Group, said that the debt has been given for refinancing purposes and working capital.

Manyata Promoters, a shareholder in Embassy Manyata Tech Park, a prominent information technology (IT) special economic zone (SEZ) in Bengaluru, along with realty firm Embassy Group and investor Blackstone Group Lp, will use the money for two of its new plotted development projects.

It will also repay loans of existing investors IFCI Ltd and Blackstone Group.

Reddy Veeranna, promoter of Manyata Promoters, did not respond to calls.

“This was a good deal in which both IIFL and Edelweiss were interested in but the requirement was larger than what we would have individually been able to do. The firms share a comfort level and decided to collaborate for this deal,” said IIFL’s Raghavan.

Private equity deal sizes in real estate are also getting larger as investors are willing to commit more capital in single transactions or collaborating with an investor partner to deploy more money.

“While collaboration may not be the norm, we are likely to see more such associations between investors bringing in different kinds of capital and different risk appetites,” said Shashank Jain, partner, transaction services, PricewaterhouseCoopers India.

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