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Business Desk – There was a strong rise in the shares of realty sector company Prestige Estates Projects on Tuesday. The stock rose nearly 3% during trading to reach an intraday high of Rs 1,643. The main reason for the rise in the stock is a big investment deal to Canada's CPP Investments.

According to the company, CPP Investments will invest up to Rs 3,000 crore in its hotel business company Prestige Hospitality Ventures Limited i.e. PHVL. After completion of the deal, CPP Investments may have up to 28% stake in PHVL.

Prestige Estates made investment agreement

Prestige Estates said in a stock exchange filing that it has entered into an agreement with CPP Investment Board Private Holdings and its hotel subsidiary Prestige Hospitality Ventures Limited (PHVL).

In this agreement, initial and important conditions regarding investment in PHVL have been fixed. The company's hotel business is an important growth segment for Prestige Estates and this investment is expected to provide capital support to its expansion.

What is CPP Investment Board?

CPP Investment Board Private Holdings is an investment company, which was founded in 2014 by Canada Pension Plan Investment Board i.e. CPP Investments.

It works as a private investment and holding company for CPP Investments. According to the given data, CPP Investments has more than 793 billion Canadian Dollars in Assets Under Management.

That is, this investment in the hotel business of Prestige Estates reflects the participation of a large global institutional investor.

Rs 3,000 crore will not be invested at once

Under the agreement, CPP Investments will invest up to Rs 3,000 crore in PHVL, wholly owned by Prestige Estates. However, the entire amount will not be invested at once. Investment will be done in different phases. After completion of the deal, CPP Investments may have up to 28% stake in PHVL.

Money will come from primary and secondary investment

This investment will be done in two ways: Primary Investment and Secondary Investment. In the primary investment, CPP Investments will directly invest new money in PHVL. With this, hotel business can get new capital for expansion and development.

At the same time, in Secondary Investment, CPP Investments will buy shares from the existing shareholders. That is, instead of the money going directly to the company, the existing shareholders will get this part.

The final structure and terms of both investments will be decided in future agreements between Prestige Estates and CPP Investments. Prestige Hospitality Ventures will be 100% owned by Prestige Estates.

At present Prestige Hospitality Ventures Limited i.e. PHVL is completely owned by Prestige Estates. That means Prestige Estates has 100% stake in the Hotel Subsidiary.

According to the company's last financial year data, PHVL had recorded a Standalone Revenue of Rs 345.9 crore.

After the proposed investment by CPP Investments, the stake of Prestige Estates in PHVL will decrease, but the capital received from big institutional investors for hotel business can give a new impetus to the expansion of the company.

What is the big trigger behind the rise in shares?

Tuesday's rise in the shares of Prestige Estates is mainly being linked to the investment deal worth up to Rs 3,000 crore. The capital received from the Global Pension Fund is likely to expand the company's hotel portfolio and provide financial support to future projects.

However, the actual financial impact of the deal will become clear only after the final terms of the investment agreement, different phases of investment and the process of acquiring 28% stake are completed.