The Shapoorji Pallonji Group has formed a new holding company, Shapoorji Pallonji Real Estate (SPRE), to consolidate its expansive real estate holdings spread across India’s key cities, and plans to monetise the assets by taking it public soon, said a top executive.
The exercise is aimed at unlocking value, streamlining operations, and paving the way for monetisation of a portfolio that comprises land parcels spread over 2,000 acres across key property markets. The value of the land alone is estimated to be around $6 billion (Rs 50,000 crore).
“Creating a unified holding company, Shapoorji Pallonji Real Estate, and consolidating our assets under this single entity is in line with our strategic vision to streamline operations and enhance value creation,” Venkatesh Gopalakrishnan, who heads the new entity as its managing director and chief executive, told ET. “To drive operational efficiencies and foster greater growth opportunities, we are positioning SPRE to leverage its scale by bringing our diverse real estate portfolio together.”
Easier access to funding
The holding company encompasses the group’s entire real estate portfolio, covering 45 land parcels and projects. These have a total development potential of around 140 million sq ft, with projects of 22 million sq ft currently under development.
According to Gopalakrishnan, who is also director at the Group Promoter’s Office, this portfolio has a total revenue potential of up to Rs 200,000 crore after development and the consolidation strengthens the company’s ability to execute large projects and provides confidence to its investors by ensuring transparency and maximum returns.
The group is considering taking the new company public in two years.
“Now that all assets have been consolidated under one umbrella, there will be consolidated profit & loss and balance sheet. The company has also been capitalised to the tune of nearly a billion dollars. With the formation of the holding company, we are definitely looking at a liquidity event in the next two years,” Gopalakrishnan said.
It plans to raise around $800-900 million in the first phase through an initial public offering of an about 10-12% stake. Further dilutions, taking the public float to the minimum requirement of 25%, could follow, taking the total fundraising to around $2 billion.
The new structure, according to Gopalakrishnan, will enable value creation, proper capital structuring, and easier access to funding. It will also allow easier access to public markets as well as private equity.
SPRE’s assets are primarily concentrated in five major cities: Mumbai, Pune, Bengaluru, Gurugram and Kolkata. It also holds large land parcels in Mysore and Nagpur. The assets include both urban infill areas and large tracts of land between Mumbai and Pune.
The real estate holding company, catering to affordable and luxury housing, currently carries about Rs 6,500 crore of debt, primarily in the form of construction finance and asset-backed loans.
“The debt is well-aligned with cash flows from ongoing and future developments, ensuring a structured repayment plan over the next four years. This year, SPRE aims to deleverage significantly, with plans to prepay Rs 2,500-3,000 crore ahead of schedule, reducing the overall debt burden,” Gopalakrishnan said.
The restructuring within the Shapoorji Pallonji Group is part of a broader strategy to unbundle its various business verticals, allowing for distinct capital structures and greater operational efficiency. By separating its construction, real estate and other businesses into independent entities, the group aims to unlock value similar to its earlier demerger of Eureka Forbes.
SPRE is positioning itself for sustained growth in the real estate sector, with plans to expand its middle-income housing arm, Joyville Shapoorji.
“We will continue to add more projects under Joyville, aiming for five new ones each year. Despite having a substantial, fully paid land bank, we will grow Joyville through acquisitions, both in capital and land,” Gopalakrishnan said.
This subsidiary, which already counts investors like the World Bank member IFC, Actis, and the Asian Development Bank, is expected to play a crucial role in SPRE’s growth strategy.
