Private Equity Firm in the Biggest Deal of India’s Real Estate Sector


July 22, 2015


The US-based private equity firm Warburg Pincus has made a big investment in the Indian real estate sector. The firm’s unit announced a $284 million minority stake investment in Piramal Realty. It is another deal big deal in India’s real estate sector, showing private equity firms are optimistic about the long-term prospects of the sector.


The Investment


Warburg Pincus’ unit will make the minority stake investment in the real estate development arm of Piramal Group. The group, valued at $5 billion, is a Mumbai-based business conglomerate owned by Ajay Piramal. Piramal Group is involved in a variety of sectors from real estate to pharma and financial services. Furthermore, the private equity firm isn’t investing in the group for the first time. Warburg Pincus has previously been involved in the group’s operations, having invested in Piramal Healthcare back in 1997.


The group’s Executive Director, Anand Piramal, said in the official statement, “We are proud to partner with one of the world’s leading private equity firms to build India’s most admired real estate company, admired not just for its scale and profitability, but also for its impact on the lives of its customers and the progress of our country”.


According to the company, the company is planning to use the investment to expand the portfolio, as well as to acquire new land parcels around Mumbai area. Economic Times also reported the private equity firm will have two seats in Piramal Realty’s board.


Growth Opportunities


The real estate company was founded in 2011 and it has since acquired over 10 million square feet of development area. It has properties and land in key growth areas such as Byculla, Thane and Mulund.


Niten Malhan, the Co-Head of India at Warburg Pincus, said in the statement, “Warburg Pincus invests in companies with high growth potential and believes that Piramal Realty is best positioned to achieve leadership in one of the world’s most attractive real estate markets.”


Warburg Pincus’ portfolio has only recently started expanding into sectors such as real estate and e-commerce in India. The firm previously invested mainly in infrastructure and energy-related industries in the country.


Strong Private Equity Interest


The Indian real estate sector has seen plenty of private equity interest in recent months. Warburg Pincus’ investment is the biggest in the sector in recent times, but there have been plenty of big deals.


Blackstone Group invested recently in the Bangalore-based Embassy Property Developments, as well as in Pune’s Panchsil Realty. But unlike many other private equity deals, Warburg Pincus has decided to invest at the entity level. Many other firms have set up Special Purpose Vehicles for specific projects.


Despite large-scale interest, the sector hasn’t been growing in recent months. The country’s real estate industry is still lacking clear policy regulations and demand has slowed for residential properties.


In a Forbes phone chat, Anand Piramal told the slow growth period is more of an opportunity for the company. “Real estate has been through a difficult time, the market is soft and it is a great time to buy assets for players like us who have the holding power,” Piramal told the magazine. It seems private equity firms agree with this assessment.


If you are looking for deals in the emerging markets, head down to the DealMarket private equity platform.

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