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30 months on, Piramal's $500-mn JV yet to take off

August 18, 2016 07:40 IST

Canada Pension Plan Investment Board has stringent processes and systems, which are proving to be a stumbling block

When two of the biggest investors join hands, one would expect a big deal making. But, two and a half years after the Ajay Piramal-led Piramal Enterprises formed a joint venture with Canada Pension Plan Investment Board (CPPIB), one of the largest pension fund managers in the world, the venture is yet to take off.

The story so far

Piramal Enterprises and Canada Pension Plan Investment Board formed a $500 million joint venture (JV); both were to bring in $250 million each
Planned to give debt to developers in Mumbai, NCR, Bengaluru, Pune and Chennai
Looked to deploy money in three years and eyed return of 18% per annum
Identified some investment opportunities at the time of announcing the JV
Now, both looking to salvage the JV

The two firms had formed a $500-million venture in February 2014 to give funding for developers of residential projects in top cities such as Mumbai, Delhi, Bengaluru, Pune and Chennai. Both Piramal and CPPIB were to bring in $250 million each. The JV was looking to deploy the entire corpus in three years and eyed an annual return of 18 per cent, according to reports.

It had also identified some investment opportunities at the time of announcing the JV.

“The JV is yet to make any investments. CPPIB has stringent processes and systems, which are proving to be a stumbling block,” said an executive.  While a mail sent to CPPIB did not elicit any response, Piramal group declined to comment.

According to the executive, the two parties might not call off the JV yet as both are looking at ways to salvage the JV.  Meanwhile, the Piramal group is in the final leg of talks with Ivanhoé  Cambridge, an arm of the second largest pension fund manager in Canada, CDPQ, to form a JV to provide equity capital to residential real estate developers.

“Piramal has moved on and is lending aggressively to real estate developers,” said the executive. Piramal is one of the largest lenders to real estate developers.

It disburses Rs 1,500 crore (Rs 15 billion) to developers every month. In one of its kind exercise, Piramal recently gave lines of credit worth Rs 15,000 crore (Rs 150 billion) to developers such as Wadhwa group, Subhod Runwal group in Mumbai, among others.

Piramal Fund Management manages funds worth Rs 8,486 crore (Rs 84.86 billion) across offshore and rupee funds and disbursed funds worth Rs 11,588 crore (Rs 115.88 billion) under proprietary debt book, thus totalling Rs 20,074 crore (Rs 200.74 billion), according to Piramal’s website.

The executive cited above said CPPIB’s other joint venture with Shapoorji Pallonji has progressed.  In June last year, the jV bought an infotech park SP Infocity in Chennai for $220 million or Rs 1,400 crore (Rs 14 billion). Both the parties announced a JV in November 2013.

In March this year, CPPIB announced a $525-million venture with Kotak Mahindra group for stressed assets whereas the former could invest up to $450 million.  CPPIB is an investment manager, which invests on behalf of 19 million contributor-strong Canada Pension Plan and manages funds worth $287 billion as of June 2016.

Photograph: Ricardo Moraes/Reuters

Raghavendra Kamath in Mumbai
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