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Warburg Pincus takes $284m slice of India developer

The New York-based private equity firm has chosen the real estate division of a conglomerate for exposure to the Indian market

Warburg Pincus, the global private equity firm, has taken a $284 million stake in Indian developer, Piramal Realty. The deal is said to be one of the largest foreign direct real estate investment in India to date.

The New York-headquartered firm has invested the sum for a minority position, giving it exposure to what Warburg’s co-head of India, Niten Malhan, called “one of the world’s most attractive real estate markets”.

Piramal Group is a Mumbai-headquartered Indian conglomerate with interests in pharmaceuticals, financial services, information management, and glass packaging. Its real estate unit was founded in 2011 and has a $5 billion development pipeline in and around the city of more than 10 million square feet in areas such as Byculla, Thane, Worli, BKC and Mulund.

At Byculla it has plans for high-rise towers, while in Thane it has a project to create a mixed-use scheme with commercial, retail, educational, and spiritual center components. Piramal has plans for a residential development in Muland and a commercial development in Kurla. The capital injection from Warburg Pincus will be used to expand the portfolio, the two companies said. More parcels of lands will be acquired in and around Mumbai.  

Anand Piramal, Piramal Group's executive director, said in a statement: “We are proud to partner with one of the world's leading private equity firms to build India’s most admired real estate company, admired not just for its scale and profitability, but also for its impact on the lives of its customers and the progress of our country.”

Warburg Pincus is making the investment on behalf of a private equity fund rather than a dedicated RE pool of capital. 

It is not the first time it has made a play for real estate exposure to India. In 2006 it made an investment in Lemontree Hotels, a private hospitality company created in 2002 to establish a network of upscale, midscale and economy hotels and that now has 27 assets in 16 cities. 

It is also the second time Warburg Pincus has entered into a transaction with Piramal. In 1997, it invested in Piramal Healthcare Group.

As well as owning a real estate development company, Piramal also has a fund management arm. The firm has been partnering with institutional investors to provide equity as well as structured debt to developers for their real estate projects. Last year, it formed a $500 million joint venture partnership with Canada Pension Plan Investment Board to provide rupee debt financing for residential projects, in what was pegged to be the largest debt financing venture since foreign direct investment was permitted in the country in 2005. 

It also raised a domestic apartment fund, with the capital raised being used to acquire apartment units at discounted prices. 

The firm also announced the first close of its maiden offshore real estate fund last November, raising $50 million towards a target of $150 million in equity.

At PERE’s India roundtable published in February, Nitin Gupta, a managing director at Sydney-based advisor Macquarie Capital, said there were between eight and 10 institutional investors seeking local partners for investments in the country.