Goldman Sachs picks up minority stake in Piramal Realty for Rs900 crore

Bengaluru: Wall Street investment bank Goldman Sachs has picked up a minority stake in Piramal Realty by investing Rs.900 crore to help the company buy properties in and around Mumbai.

The Mumbai-based real estate development arm of Piramal Group had raised Rs.1,800 crore from private equity firm Warbug Pincus in July.

“What is exciting is that this gives us an opportunity to build a potentially big company with two partners, who understand India and real estate, and are in it for the long-term, willing to make strategic bets,” said Anand Piramal, executive director of Piramal Group, in a telephone interview.

Piramal said as a leading investor in global real estate, Goldman Sachs’ experience and expertise will inspire the company “to build world-class developments in India and achieve the highest standards of design, technology, quality, execution and customer service.”

Founded in 2011, Piramal Realty has around 10 million square feet of commercial and residential projects under development in Mumbai. It plans to launch Piramal Vaikunth, a mixed-development project in Thane, near Mumbai in the next few months.

Piramal Realty is also planning to launch a buy-back guarantee offer called “Piramal Assurance” in its projects, beginning with the Thane project, where it will offer to buy back any residential unit from a customer at a 5% discount to the market value until possession should a buyer not be satisfied.

“For most customers, buying a home is their single largest and most important investment. Our ‘Assurance’ will reduce the financial risk of purchase and provide peace of mind for customers, who will know that their investment is safe and liquid. This also will set high performance expectations for our team and will compel us to keep our customers happy and at the centre of our business,” said Piramal.

Entity-level investments in real estate are a thing of the past now, but Piramal’s back-to-back deals with marquee investors imply a sense of faith in global investors to back Indian companies with strong fundamentals.

Both Warburg Pincus and Goldman Sachs entity level investments in Piramal Realty point to their high risk-taking ability when most global funds are forming platform-or project-level deals with real estate developers here, said property consultants.

“This investment is consistent with our ongoing strategy of partnering with India’s leading entrepreneurs to invest in sectors critical to the country’s development. The government’s focus on simplifying regulation and boosting economic growth will kick start investment and consumption. Under such a cyclical recovery the demand for high-quality, modern housing and office space from a trusted, proven brand and standard-setting developer will serve to create a significant leader in Indian real estate,” said Ankur Sahu, co-head of private equity at Goldman Sachs in Asia in a statement.

Since 2006, Goldman Sachs has deployed more than $2.5 billion in the country. Globally, it has significant real estate investments and has invested approximately $43 billion in the sector.

In May, Goldman Sachs and realty firm Nitesh Estates Ltd partnered to jointly invest up to $250 million (around Rs.1,600 crore) in profitable commercial real estate assets in India in a so-called platform deal between an investor and a developer.

Earlier in 2014, Embassy Property Developments Pvt. Ltd bought out from its partners, Goldman Sachs and Century Real Estate Holdings Pvt. Ltd, a 6.5-acre project in Bengaluru that will have a Four Seasons hotel and luxury homes. Goldman Sachs, which had invested around Rs.450 crore in the project, exited without much profit.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.