Indiabulls realty co to merge with B’luru-based Embassy

MUMBAI: Indiabulls Real Estate, the listed arm of the Indiabulls group, and Bengaluru-based realty major Embassy, which is unlisted, have agreed to merge through a share-swap deal. After the merger, global private equity major Blackstone will infuse $200 million into the entity. As part of the deal, the merged entity will be controlled by Embassy and its promoter Jitu Virwani, while Sameer Gehlaut, the promoter of Indiabulls will become a passive shareholder.This will also mark the exit of Indiabulls Group from the real estate sector.
Exiting the real estate sector was part of Indiabulls Group’s plan when it was seeking to merge Lakshmi Vilas Bank with itself. The move was shelved after the RBI declined it the green signal.
The current shareholders of Indiabulls Real Estate will get the scrips of the merged entity, which will also be listed on the bourses. The share-swap ratio will be decided by independent valuers and merchant bankers, the company said. The promoters of Embassy Group and Blackstone will also hold shares in the merged entity.
After the merger, the company will become the development arm for the Embassy Office Park REIT, the first listed real estate investment trust in India which is a joint venture between Embassy Group and Blackstone. The REIT will benefit by getting more developed assets, thereby increasing the yield of the REIT, which intends to provide compounding returns to its unit holders by flow of regular assets in the instrument, company sources said.
Indiabulls group also has a strong relationship with Blackstone, which in the last two years have sold properties worth about Rs 12,000 crore to the PE giant. Currently, Embassy Office Park REIT has a market capitalisation of Rs 32,000 crore, while Indiabulls Real Estate is valued at Rs 4,865 crore. Since listing in April last year, Embassy’s REIT has given a 30% return to its investors.
Indiabulls Group founder & chairman Sameer Gehlaut said that the deal, which marks the exit of the group from real estate development business, is according to the plan that was announced in June 2019. “We will now fully focus on our financial services businesses,” Gehlaut said. Indiabulls Real Estate will have zero net debt at the time of the merger, the company said. After the deal was announced, the stock price of Indiabulls Real Estate on the BSE closed 5% higher at Rs 107.