Piramal Finance Ltd, a subsidiary of Piramal Enterprises Ltd, has lent Rs325 crore to Noida-based realty firm Mahagun Group to refinance existing debt and as construction finance, top officials of the company have said.
In a structured debt transaction, Piramal has sanctioned the money to two projects of the developer, in Noida and Greater Noida. The projects—Mahagun Manorial and Mantra—are in different stages of construction and have clocked around 300,000 sq. ft in sales in the last year or so.
“Our investment is intended to achieve financial closure to aid the completion of construction across both projects. We are pleased to have partnered with Mahagun, which has a track record of delivering over 10 million sq. ft across the Noida and Greater Noida region,” said Khushru Jijina, managing director, Piramal Finance. Mahagun currently has around nine projects under construction.
“The structured debt will be used to also bring down the cost of our existing debt and for project construction,” said T.K Peer, chief financial officer, Mahagun Group.
The National Capital Region (NCR) is India’s largest property market but also the worst impacted by the prolonged slowdown in the sector that has lasted more than four years now. However, compared to Gurugram, property analysts say, Noida and Greater Noida projects have seen relatively better sales.
Property consultancy Cushman and Wakefield was the advisor to the transaction.
It is not surprising that investors such as Piramal have been selectively and cautiously investing in NCR over the last few years, given the fact that project sales have been slow and most developers are struggling to generate cash flows.
Earlier this year, Piramal Finance lent Rs425 crore to Noida-based Prateek Group to repay existing loans to Xander Finance Pvt. Ltd and a couple of banks and complete construction of its township project near Ghaziabad.
“Not only fund mangers, but developers in NCR have also been raising funds only if they have to. Sales are slow and launches aren’t happening, so developers are careful about raising money at the right cost,” said Chintan Patel, partner, deal advisory-real estate and hospitality, KPMG India.
Patel said in the current scenario, while funds are being cautious about who they partner with and the projects they finance, developers are also playing their cards carefully and being reasonable though the demand for capital remains high.
Piramal Finance has also been focusing on investing in cities like Mumbai and Bengaluru. This week, it said it had given a loan of Rs 650 crore to Bengaluru-based Embassy Group. The transaction involves Embassy lending the money to its project partner Manyata Promoters Pvt. Ltd and a shareholder in Embassy Manyata Tech Park, a prominent information technology (IT) special economic zone (SEZ) in Bengaluru for the latter to repay existing debt.