Shapoorji real estate arm closes Rs 750 crore debt financing deal

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Shapoorji Pallonji Real Estate (SPRE) has raised $ 100 million (around Rs 750 crore) from non-bank financial firm Asia Pragati, people with knowledge of the matter said. It is one of the largest debt financing deals in real estate this year.

According to some sources, SPRE has opted for structured debt financing at a rate of around 20 percent. The NBFC normally takes twice the coverage of its developer loans, sources said. Asia Pragati is part of the Hong Kong-based global investor PAG.

The consultants said the deal is growing in importance given the overall cash flow crunch facing developers as well as NBFCs. They said the deal was important because NBFCs are now selling developer loans to become lightweight assets. “The SPRE had to honor some debt payment obligations, which is why they opted for this deal,” sources said, adding that the SPRE has also taken a moratorium on debt payments on a selective basis.

SPRE chief executive Venkatesh Gopalakrishnan declined to comment. A letter to Asia Pragati did not elicit a response until it went to press. Anarock Capital, who was an adviser in the case, also declined to comment.

According to reports, the Shapoorji Pallonji group is in talks with Brookfield to raise $ 400 million to repay its debts. The group is also looking to sell solar assets to toll highways. He is due to repay around $ 950 million in debt by 2021, according to a Bloomberg report.

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

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The deal comes at a time when NBFCs and housing finance companies are selling their portfolios to special situation funds. Covid-19 and the lockdown have made developer loans even riskier for NBFCs. Although realtors may benefit from a moratorium until August, they could struggle to repay lenders, experts said.

In the past two weeks, over Rs 6,000 crore of these loans have been sold or refinanced by companies like Indiabulls Housing Finance. And, about Rs 8,000 crore of those loans could be refinanced in FY21, bankers handling the transactions said. Developers are also facing severe headwinds as home sales hit their lowest level in 10 years.

On her website, Asia Pragati claims to have zero debt, a rarity among NBFCs. The company lends with a focus on special situations, real estate, distressed assets and structured transactions. According to sources, Asia Pragati is also in talks with other developers to lend it.

Saurabh Shatdal, Managing Director of Capital and Land Markets at Cushman & Wakefield, said: “The Indian real estate market is going through difficult times given the backdrop of Covid and the NBFC crises. These times have created opportunities for companies like Asia Pragati to address immediate liquidity issues for developers through last mile funding and LIFO (last in, first out) priority structures.

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