Shapoorji real estate arm enters Rs 750-crore debt financing deal

Consultants said this deal assumes significance given the overall liquidity squeeze faced by developers as well as NBFCs
Shapoorji Pallonji Real Estate (SPRE) has raised $100 million (around Rs 750 crore) from non-banking finance company Asia Pragati, people with knowledge of the matter said. This is one of the biggest debt financing deals in real estate this year.

According to sources, SPRE has gone for structured debt financing at a rate of around 20 per cent. The NBFC normally takes two times cover on its loans to developers, sources said. Asia Pragati is part of Hong Kong-based global investor PAG.

Consultants said this deal assumes significance given the overall liquidity squeeze faced by developers as well as NBFCs. They said the deal was significant as NBFCs are now selling developer loans to become asset light. “SPRE had to meet certain debt payment obligations that’s why they went for this deal,” said sources, adding that SPRE has also taken moratorium on debt payments selectively.

SPRE Chief Executive Venkatesh Gopalakrishnan declined to comment. A mail sent to Asia Pragati did not elicit any response till the time of going to the press. Anarock Capital, which was an advisor in the deal, also declined to comment.

According to a few reports, the Shapoorji Pallonji Group is in talks with Brookfield to raise $400 million to repay its debt obligations. The group is also looking to sell solar assets to toll roads. It has to repay about $950 million of debt by 2021, a Bloomberg report said.

Gopalakrishnan had said in May the company would reach 60-70 per cent of sales in six months. He had also said the company would increase the share of three bedroom apartments to cater to work-from-home needs.

The deal comes at a time when NBFCs and housing finance firms are selling their portfolios to special situation funds. Covid-19 and lockdown have made developer loans even more risky for NBFCs. Though realtors can avail moratorium till August, they could struggle to repay money to lenders, experts said.

In the past couple of weeks, over Rs 6,000 crore of such loans have been sold or refinanced by the likes of Indiabulls Housing Finance. And, about Rs 8,000 crore of such loans could be refinanced in FY21, bankers who deal in such transactions said. Developers are also facing severe headwinds as home sales have hit 10-year low.

On its website, Asia Pragati says it has zero debt — a rarity among NBFCs. The firm lends with a focus on special situations, real estate, distressed assets, and structured deals. According to sources, Asia Pragati is also in talks with other developers to lend.

Saurabh Shatdal, managing director of capital markets and land at Cushman & Wakefield, said: “Indian real estate market is witnessing challenging times given the backdrop of Covid and the NBFC crises. These times created opportunities for firms like Asia Pragati to solve immediate liquidity problems for developers by way of last-mile funding and priority LIFO (last in first out) structures.

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