Indiabulls may redraw exit plan, ownership of realty business

In June, Embassy Group bought 14% in IBREL from Gehlaut for around  ₹950 crore

Indiabulls Group may rework its plan to exit the real estate business following the Reserve Bank of India rejection of a merger proposal of Lakshmi Vilas Bank and Indiabulls Housing Finance Ltd, a person aware of the matter said, even as it plans to turn Indiabulls Real Estate Ltd (IBREL) debt-free and work out its ownership pattern.

While the merger was taking shape, Indiabulls had said earlier this year that it will exit real estate by making IBREL debt-free and not having Sameer Gehlaut as promoter of IBREL.

Subsequently, in June, Bengaluru-based developer Embassy Group bought 14% in IBREL from Gehlaut for around 950 crore at around 150 a share and was expected to buy the remaining 14% stake either alone or with its investor partner Blackstone Group Lp.

In September, IBREL sold its remaining stake in some of its office assets in Gurugram and central Mumbai to Blackstone for around 2,717 crore, paving the way for the New York-based investor to take full control and ownership of the former’s commercial office portfolio.

IBREL is also in the process of closing a transaction with Blackstone to sell stakes in a few other commercial assets in Mumbai, Delhi and Gurugram, which will take the entire strategic stake divestment to 4,420 crore once completed. The capital would mainly be used to pare debt.

“The transaction with Blackstone is expected to be completed next week. Once that’s achieved, the debt level will reduce significantly. In the interim, there is a plan to launch a buyback of shares for which the IBREL board meeting is scheduled to be held on 11 October. The company is also mulling over an efficient structure and form of ownership keeping in mind the various stakeholders,” said the person mentioned above, who didn’t wish to be named.

IBREL shareholders approved a proposal to sell its London property to promoters for £200 million at an annual general meeting on 28 September. The stage was set for the exiting the real estate business ahead of the merger, until the RBI’s decision to reject it on Wednesday.

On Thursday, Embassy Group chairman and managing director Jitu Virwani said it would like to remain as an investor in IBREL with 14% stake even if it does not buy the remaining 14% stake from the promoter.

He also said that once the entire transaction between Blackstone and IBREL is concluded, the office assets would eventually be transferred to their real estate investment trust (REIT).

Embassy and Blackstone launched Embassy Office Parks, India’s first REIT earlier this year.

“…If Embassy doesn’t buy the remaining promoter stake in IBREL, then the latter would be effectively running the company with the former being just an investor. Even if the commercial office portfolio is carved out with Blackstone buying it out, IBREL still has a sizeable, good quality residential portfolio,” said a second person, who didn’t wish to be named.

At the end of FY19, IBREL’s net debt stood at 4,590 crore.

In March 2018, Blackstone had first bought 50% of IBREL’s commercial office assets for 4,750 crore. Later it had also bought the developer’s office park in Chennai for around 900 crore.