Piramal Capital & Housing Finance, a wholly-owned subsidiary of Piramal Enterprises, is planning to raise a $500-million fund to set up an asset aggregation platform that would bring together a portfolio of yield-producing operating properties across sectors.
The proposed platform, which will be set up in the next three months, will be established through an Infrastructure Investment Trust (InvIT) or an Alternate Investment Fund (AIF).
"Demand for growth capital is going up as the economy is back on the growth track...We are looking to set up an asset aggregation platform to aggregate operating assets that have a steady stream of yield income," Khushru Jijina, Managing Director of Piramal Capital and Housing Finance, told ET .
Funds may be raised both overseas and at home. Around 7-8% of the proposed fund size would come from the Piramal Group as sponsor commitment.
Piramal Capital may initially start with an AIF and then go on to list it as an InvIT.
This will be a sector, size and product agnostic fund that will use various capital structures, including equity and debt, or a combination thereof while acquiring assets.
Piramal Capital & Housing Finance already engages with institutional and retail investors through Mumbai Redevelopment Fund and Apartment Fund through Piramal Fund Management and its strategic partnerships with global pension funds such as the Canada Pension Plan Investment Board (CPPIB), APG, and Ivanhoe Cambridge.
The proposed asset aggregation platform will be set up under Piramal Capital's non-real estate wholesale lending arm Corporate Finance Group (CFG). The vertical's AUM has already grown 2.5 times from a year ago to 10,000 crore as on March end as it expanded its product suite from mezzanine to include senior lending, project finance, promoter funding, Loan against Securities (LAS) and acquisition funding.
"The CFG platform has delivered on strategically expanding its offering beyond high-yield mezzanine debt in the infrastructure space to become a more diversified and granular, sector agnostic vertical providing deeply customized financing solutions across the yield curve," Jijina said.
The AUM of Emerging Corporate Lending (ECL), set up a year ago to target the emerging and mid-market space, stood at 1,000 crore as on March end. ECL has concluded 20 deals in emerging and mid-market space in its first year of operations, while CFG closed 16 transactions during the year.
The robust growth in CFG and ECL's business came on the back of a stated strategic intent at the start of the financial year to diversify the overall wholesale lending business beyond real estate and also add granularity to the non-real estate business through the addition of both new sectors and new products, he added.
CFG's asset portfolio is now diversified across multiple sectors including Infrastructure & renewable energy, cement, logistics, auto ancillary and packaging and it plans to add more sectors.
"We have previously funded most of the top tier renewable energy players in India. As the sector has matured, CFG has focused on lending against the value of operating assets and has also expanded into SPV level project finance," he said.
Jijina expects continued opportunities in the sector with the recent government impetus to achieve the target of 100 GW of solar power capacity by 2022.
CFG also forayed into project finance in 2017-18, underwriting 2,200 crore for a transmission project of Sterlite Group. "We are seeing strong traction in the project financing space. We also extended project financing to renewable energy giants ReNew Power and Greenko Group," he said.
During the last financial year, CFG also identified auto ancillary as a target sector and has already deployed around 1,000 crore.
"We did a deep-dive into the auto ancillary sector and identified the specific pockets we could target...Co-evolution of auto ancillaries with the Original Equipment manufacturers (OEMs) makes cash flow profile of auto industry predictable," Jijina said.
With a focus on diversification, CFG has also added the logistics sector to its portfolio in the last financial year by lending to two leading logistics companies, JM BaxiGroup and Apollo LogiSolutions.
Jijina expects positive developments such as Sagarmala, dedicated freight corridor, inland waterways and implementation of GST would facilitate investment in port infrastructure, reduction in logistics cost and consolidation in the sector.
CFG has aggressive plans for the coming financial year and plans to expand its footprint across India. "We will continue to grow the team and scale for further growth even as we expand both product categories and sectors and geographies," Jijina added.
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