Indiabulls Real Estate to merge certain Embassy Property projects with self
Embassy is in discussions with financial investors such as The Blackstone Group Inc. and others to raise up to $200 million before the said merger. This equity investment of $200 million will bring significant cash in the merged entity for expanding its business operations.
by Kailash Babar
MUMBAI: Realty developer Indiabulls Real Estate has approved merging Bengaluru-based Embassy Property Developments with itself. Apart from bringing its ongoing, completed and planned projects into the company, Embassy is in talks with investors such as Blackstone Group and others to raise up to $200 million before the said merger.
This equity investment of $200 million is expected to support the merged entity to expand business operations.
The merged platform will be controlled by Embassy and Jitu Virwani will be the new promoter of the merged platform. Sameer Gehlaut, the current promoter of Indiabulls will become a passive shareholder and focus only on financial services. With this, Indiabulls Group will move out of realty development business.
Embassy and the financial investor will receive shares of Indiabulls Real Estate as per the share swap ratio approved by both the companies.
The final swap ratio of the merger is expected to be announced within 4 weeks after receiving valuation reports from independent merchant bankers. Post this merger, the shareholders of the company will be Indiabulls Real Estate’s existing shareholders, promoters of Embassy and financial investors including Blackstone.
The merged entity will be the development arm for both commercial and residential assets, Indiabulls Real Estate said in a regulatory filing. The listed company’s name is also expected to be changed following the completion of merger.
Last year, Embassy Group was in advanced talks to acquire majority stake in Indiabulls Real Estate. However, the company later said that it was reconsidering the plan, but will continue to remain an investor in Indiabulls Real Estate.
Embassy owns 14% in the Mumbai-based property developer via stake acquired in a bulk deal last year. This was the first of a three-step transaction that would have allowed Indiabulls Group promoter Sameer Gehlaut to exit the real-estate company.
Gehlaut owned more than 39% and Embassy was expected to make an open offer to minority shareholders after the promoter’s exit, taking the total deal size to Rs 2,700 crore. As per the deal terms, Embassy was then expected to acquire Gehlaut’s balance equity of more than 24%.
Indiabulls Group was looking to divest its real estate holdings completely to make Indiabulls Real Estate a zero-debt entity and abide by the central bank requirement of no exposure to the property business to secure the approval for its merger with Lakshmi Vilas Bank. The Reserve Bank of India, in October, rejected Indiabulls Housing Finance’s proposal to merge with Lakshmi Vilas Bank.
Some of Embassy assets are presently owned by entities managed and controlled by the company jointly with Blackstone, for which it is in discussions with Blackstone to contribute such assets as part of the merger transaction.
Under the proposed merger now, Indiabulls Real Estate will issue its equity shares of face value of Rs 2 each to the shareholders of Embassy, a privately held company.
The swap ratio would be approved by the board of both the companies, resulting into the shareholders segment such as Indiabulls Real Estate’s existing shareholders and Embassy shareholders’ including promoters, Blackstone and financial investors.
Indiabulls Real Estate’s board has constituted a Reorganization Committee to examine and evaluate the options to implement the aforementioned merger proposal. These include appointment of valuers, merchant bankers, and other intermediaries to prepare and present a draft scheme and related documents, including the valuation report, fairness opinion and share swap ratio to be placed before the board within four weeks for final approval.
Indiabulls Real Estate has delivered over 24 million sq ft commercial and residential projects and has sold some commercial assets to Blackstone for around Rs 12,250 crore in the last 2 years. The near-completion and under-development projects of the developer totalling 32.7 million sq ft is expected to generate sales of around Rs 22,750 crores and net surplus of over Rs 11,000 crores. Additionally, the company holds land bank of over 1,900 acres and a Special Economic Zone (SEZ) of 1,424 acres, Indiabulls said.
Embassy Group has presence in commercial, residential, hospitality segment across Indian and international markets and has many operating projects. It has developed over 54 million sq ft commercial, residential, retail, hospitality, services, educational and industrial warehouse spaces and holds land bank of more than 1,000 acres across the country.
Embassy Office Parks REIT, a joint venture of Embassy and Blackstone, is India’s first listed real estate investment trust and has a market cap of over Rs 32,000 crores.