Ajay Piramal on India’s first renewable InvIT, NBFC biz, Lodha partneship & more

The IPO market for renewables does not exist today because the expectations of people from the IPO market are much more than what a renewable story plays out, said Ajay Piramal, Chairman, Piramal Group, in an interview with ETNOW. Piramal also says that more than Rs 1,000 crore of loans that they have given to Lodha will come down.

Edited excerpts:

Congratulations, another big one with one of the global marquee asset allocators, What exactly is the structure of this transaction? It is a platform for renewables. What would your interest be and how have Piramal Enterprise and Canadian Pension Fund come together on this one?

With Canadian Pension Fund and Piramal, we are co-sponsoring renewable energy focussed InvIT. This is a $600-million asset aggregation platform where CPPIB will put $360 million and Piramal Enterprises would put in $90 million. Our relationship with CPPIB began in 2013 when we had a platform where we do wholesale lending to real estate sector.

The platform that we are now setting up for renewable energy is a good vindication of what we have been doing over time. The Canadian Pension Group has seen the way we have the quality of team, the way we do underwriting and the governance standard that we have and hence would like to cosponsor with us this space.

This is the first ever InvIT focussing on renewables. What kind of profile of returns does this business have? In the past couple of decades we have seen attempts being made but business models were not very successful. Is the environment much more conducive for improved returns?

As far as renewables are concerned, going forward, InvITs is the way we will be able to attract capital for renewables. As you have said and we noticed, the IPO market for renewables does not exist today because the expectations of people from the IPO market are much more than what a renewable story plays out.

This is a time where InvITs can have a return anywhere between 10% and 12-13%. The investors are happy with that. This is the type of vehicle that I see happening more. There is going to be consolidation in the renewables space and InvITs would be the way forward.

Both Canadian Pension Fund and Piramal Enterprises will be the co-sponsors and you aim to raise 25% from other investors. What category of investors would you be reaching out to and what kind of money would you attract for the remaining part?

We need to raise about $150 million more and these will be from investors who look at steady long-term return, like pension funds. They want steady returns without too much risk. That is the sort of investors that we will attract because the InvIT assets will be all cash- generating assets.

How is the NBFC part of the business panning out? There are reports that you have done another MOU with a large realtor. The street is a bit concerned about overall NBFC business and real estate and construction in particular. What is your observation there?

Our view has been that our NBFC business has been steadily doing well. Even last year, we saw a steady increase of 24% on the top and bottom line. We are confident that going forward, the number of NBFCs able to provide high quality credit is coming down and Piramal is one of those which will be able to provide this credit.

We are very confident about our underwriting. The MOU that you are talking about is not done by Piramal Enterprises. That is by another group company of ours Read More – Source