MUMBAI: Billionaire Ajay Piramal-controlled Piramal Fund Management is in the process of investing about Rs 1,500-2,000 crore in realty developer Wadhwa Group's portfolio of projects.
The investment will be made in the form of lease rental discounting that will refinance the developers' existing debt facilities, two persons familiar with the matter told ET.
The developer had availed Rs 1,200 crore debt funding through lease rental discounting at three of its commercial projects in Mumbai about five years ago. This debt facility is being refinanced though the funds coming from Piramal Fund Management, while the balance proceeds will be used as growth capital.
"While the interest cost for earlier debt was around 10%, the refinancing is being availed at 9%. The financing transaction is expected to be concluded anytime soon," said one of the persons mentioned above.
The refinancing will also allow the developer to consolidate its earlier lease rental discounting finance that was availed from several banks.
Both Piramal Fund Management and Wadhwa Group declined to comment.
Lease rental discounting (LRD) is a financing mechanism under which a term loan is offered against rental receipts derived from lease contracts with corporate tenants. The owner of the property gets debt financing based on the discounted value of the future rentals and the underlying property value. It is usually offered against income-producing commercial assets such as office properties, retail malls, and logistic parks.
Wadhwa Group has six commercial projects with leasing space of around 2 million sq ft, mainly in Mumbai's secondary business district Bandra-Kurla Complex (BKC). The company is also in the process of launching six new residential projects in the next few quarters.
About a month ago, the Vatika Group raised Rs 800 crore from Piramal Finance as structured debt for supporting the growth plans of one residential and two hospitality projects in Gurgaon.
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