Warburg Pincus, a private equity major is not a stranger to generate big profits out of small investments. An investment of $292 million made in Sunil Mittal’s Bharti Tele-Ventures called Bharti Airtel that the largest telco in the country between 1999 and 2001, the firm gained $1.6 billion in the year 2005. This is a great investment as it is a higher return of 5.5 times. In the year 2007, it invested around Rs 245 crore for a majority stake in Alliance Tire and also sold the same for Rs 2,850 crore in 2013.
Now, Warburg again did the unexpected by accepting to invest Rs 1,800 crore in the family real estate firm owned by Ajay Piramal to hold a minority stake. This amount might appear small, but it is India’s largest foreign direct investment that has happened in the real estate industry since the year 2008. Also, this is the second largest after Dubai based Emaar’s investment in JV with MGF.
Piramal was once the country’s premier drug tycoon and it is now busy with the financial services and real estate sectors and it sells cheap finance to the truck owners and a fleet of operators. Also, the firm builds high-rise apartments in Mumbai’s abandoned mill lands.
Piramal Realty will make use this investment to acquire land in several parts of the city and build residential towers. Warburg Pincus, headquartered in New York will get a couple of seats on the board of Piramal Realty.
The deal is definitely an exception to both the firms as the money is claimed to be invested in the company and not in a particular project. It is not a buyout, but an investment to yield the returns.
Piramal Realty based in Mumbai was founded in the year 2011. It has over 10 million sq ft projects under development in several parts of Mumbai and the neighboring localities such as Worli, Mulund, Byculla, Thane and Bandra-Kurla Complex. Piramal has claimed that its focus will be local as the real estate is a game that is given each city’s regulations and unique micro markets of the city.
