Embassy, Kalpataru tap global funds for ~2,000 cr

Embassy raises ~1,200 crore from Bain Capital; Kalpataru ~850 crore from PAG

The trend of property developers raising private debt from global credit funds is catching up, as domestic non-banking financial companies (NBFCS) are focusing on shedding risky real estate loans and cleaning up their balance sheets after the liquidity crunch caused by IL&FS defaults earlier.

Though developers raised anywhere between ~150 crore and ~750 crore from global funds last year, now ticket sizes of loans have gone up, experts said.

In two separate deals, Bengaluru-based property developer Embassy Group has raised ~1,200 crore from the credit arm of global private equity investor Bain Capital, and Mumbai-based Kalpataru has raked in ~850 crore from Hong Kong-based global fund PAG, said sources in the know.

Private debt means debt extended to privately held companies. The money borrowed from Bain Capital Credit and PAG is to refinance debt, and fund residential projects, sources said.

The exact terms of the loans, including the interest rates and the structuring of the debt, are not known. However, sources said the global funds charged around 20.per cent while domestic NBFCS 18-20 per cent.

Of the ~1,200 crore Embassy took, ~350 crore will be for the company’s existing residential projects, sources said.

An Embassy spokesperson declined to comment on the matter. Neither did the spokesperson for Bain.

Embassy is in the final lap of merging with Indiabulls Real Estate to create a large combined entity which will spearhead its residential ventures in the country.

Embassy recently floated a $500 million platform with Canada’s Ivanhoe Cambridge to invest and develop office projects in the country.

Bain Capital set up the credit business in India in 2019 and formed a team for it. It had floated a stressed asset fund -India Resurgence Fund -- with Piramal Enterprises in 2016 to invest about $1 billion in stressed assets.

Kalpataru, one of the biggest developers in Mumbai, needed money for funding projects and refinancing, sources said.

Emails sent to Kalpataru and PAG did not get a response till the time of going to press.a PAG spokesperson said it did not have any comments to make .

PAG is a major investment firm in Asia and manages $40 billion across private equity, private credit, and real estate. It has done many deals in the past with Indian developers.

PAG lent $100 million to the Shapoorji Pallonji Real Estate last year. It also gave ~175 crore to the Century Real Estate of Bengaluru for the latter’s luxury housing project. “After the liquidity crisis faced by NBFCS, nobody was giving money. Foreign funds saw the opportunity and came in,” said Vishal Srivastava, president, corporate finance, Anarock Capital.

Srivastava said there was a renewed interest on the part of developers in raising money from global funds on account of a large cheque-writing ability, a partial exit to existing lenders, and flexibility in the repayment structure.

He said this avenue of capital was different from the Indian sovereign fund SWAMIH in its character of giving a partial exit to existing lenders and the ability to write portfolio level deals, and focused on projects which did not get a hearing with SWAMIH due to inherent restrictions of the product fitment in affordable and mid-income housing.

Said Saurabh Shatdal, managing director (land and capital markets), Cushman & Wakefield: “The NBFC crisis, starting from the IL&FS collapse, created a deep vacuum in the financing industry. The money stopped flowing in from investors, the NBFCS stopped getting money, and repayments were affected. Because of this dearth of capital, developers had no choice but to look for sources outside the country.”