Here's what Embassy Group deal means for Indiabulls Real Estate investors

As per reports, the US private equity giant Blackstone Group and Bengaluru-based property developer Embassy Group are set to jointly acquire Indiabulls Real Estate's promoters' stake.

Shares of Indiabulls Real Estate (IBREL) rallied as much as 15 per cent to Rs 151 apiece on the BSE on Friday after the promoters sold 14 per cent of their holding in the company through open market.

At 09:15 am, around 61.33 million shares representing 13.6 per cent of total equity of Indiabulls Real Estate had changed hands on the BSE in single transaction, the exchange data shows. Till 10:20 am, a combined 90 million shares or 20 per cent of total equity of real estate Company changed hands on the NSE and BSE.

The name of the buyers and sellers were not ascertained immediately.

“In line with Company’s promoters' strategy to focus on financial services in the long run, the promoters intend to dispose-of up to 14 per cent of the fully paid-up share capital of the Company (out of the aggregate 38.72 per cent fully paid up share capital of the Company, currently held by them) to third party investors,” Indiabulls Real Estate said in a regulatory filing.

According to reports, the US private equity giant Blackstone Group and Bengaluru-based property developer Embassy Group are set to jointly acquire Indiabulls Real Estate's promoters' stake at an estimated enterprise value of around USD 1 billion .

The stock, however, pared its early gains and was ruling over 3 per cent higher at Rs 136.25 at 09:50 am. Other group stocks also surged in the trade. Indiabulls Hosuing Finance and Indiabulls Ventures gained up to 3 per cent each in the early morning deals. In comparison, the S&P BSE Sensex was trading 73 points lower at 39,457 levels.

Ajit Mittal, President of Indiabulls Group, in a telephonic conversation with CNBC-TV18 confirmed that the company sold its promoter stake to the Embassy Group via block deal in the morning trade. Mittal added that the chief reason behind exiting real estate business was to fast track Lakshmi Vilas Bank (LVB) merger.

Minutes later, the management of Embassy Group too confirmed the deal, in an interview with the TV channel. "Will pick up 28 per cent stake in Indiabulls Real Estate eventually," Jitu Virwani, CMD at Embassy Group was quoted as saying. 

Earlier, news reports suggested the Blackstone-Embassy Group JV is set to acquire the entire 39 per cent stake of Indiabulls Group chairman Sameer Gehlaut in Indiabulls Real Estate (IBREL), a move that will see Indiabulls exit the real estate business to focus solely on financial services. 

WHAT'S IN IT FOR INVESTORS

The deal, according to analysts, is positive news for the investors in the IBREL as they will get a better set of promoters, having a good reputation. It is also positive for the company as exiting real estate business will help them to focus entirely on merger with LVB, says Ambareesh Baliga, independent market expert.

"It's a good move. They want to become a bank with the merger of LVB. So, it's a good deal that they have worked out," says Sudip Bandyopadhyay, Group Chairman at Inditrade Capital. "The move augurs well for the investors in IBREL too as they are going into the good hands... Embassy Group has good credibility and good track record," Bandyopadhyay added. So, it's a win-win situation for both the Group and the investors.

Mustafa Nadeem, CEO at Epic Research, says,"We believe this company is now transforming itself into a financial industry focused player. It had to be this way. The kind of debts that the company was having in the balance sheet the time they entered this business vertical was hurting their overall efficiency. This is rather positive for the group as they might be now focused only on the financial space."