Indiabulls Real Estate, Embassy Group merge assets

Indiabulls Real Estate and two subsidiaries of Embassy Group have entered into a definitive agreement to merge their residential and commercial projects across markets.

Shares of Indiabulls Real Estate declined 2.31% to Rs 71.85 on BSE. The stock traded in the range of Rs 70.35 to Rs 78.80.

Shares of Embassy Office Parks REIT were down 0.49% at Rs 368.60 on BSE. The scrip hovered in the range of Rs 368.60 to Rs 370.30 so far.

NAM Estates and Embassy One Commercial Property Developments, both Embassy group entities, and Indiabulls Real Estate (IBREL) have entered into definitive merger documentation to amalgamate ongoing, completed & planned residential and commercial projects of these two subsidiaries.

Under the terms of the agreement, which has been unanimously approved by both boards of directors from Indiabulls Real Estate (IBREL) and Embassy Group, IBREL's shares are being valued at Rs 92.50 per share, a 25.76% premium from Tuesday's closing price. The proposed merger will be achieved through a cashless scheme of amalgamation.

NAM shareholders will get 6.619 shares of IBREL for every 10 shares of NAM whilst NAM Opco shareholders will get 5.406 shares of IBREL for every 10 shares in NAM Opco.

Following the merger being effected, the resultant listed entity shall be owned 44.9% by Embassy Group, 26.2% by the existing public & institutional shareholders, 9.8% by existing IBREL Promoter Group and 19.1% by BREP & other Embassy institutional investors.

The proposed merger will create one of India's leading listed real estate development platforms with launched/planned area totaling to 80.8 mn sq. ft, having 53% commercial and 47% residential assets, and 30 projects with key geographical focus in Mumbai (MMR), NCR, and Bengaluru.

The amalgamated company will have a strong market leadership potential, post amalgamation, with net surplus from residential projects (including launched and planned projects) of Rs 18,592 crore; potential annual rent on completion of planned commercial projects of Rs 4,241 crore; land bank (with future development potential) of 3,353 acres.

The merger shall also provide diversification to IBREL shareholders towards a balanced mix of residential and commercial development with visibility on near term liquidity through sold receivables in excess of Rs 4,220 crore for the combined entity. The announcement was made after market hours yesterday, 18 August 2020.

The combined entity to be renamed as Embassy Developments and to be co-headquartered in Mumbai and Bengaluru. When the transaction closes, Jitendra Virwani and the current Embassy promoter entities of NAM shall be the new promoters of IBREL. As per the company's regulatory filing, the merger and reclassification of promoter shall be subject to approval of respective creditors and shareholders and applicable regulatory authorities, including but not limited to Competition Commission of India (CCI), stock exchanges, Sebi, NCLT(s) and completion of other agreements integral to the merger. The merger is expected to be completed by Q2 FY2022.

On a consolidated basis, Indiabulls Real Estate reported net loss of Rs 109.71 crore in Q3 December 2019 compared with net profit of Rs 108.61 crore in Q3 December 2018. Net sales tanked 93.6% to Rs 116.30 crore in Q4 March 2020 over Q4 March 2019.

Indiabulls Real Estate is engaged in the development of real estate projects and allied activities. The firm's operations include real estate project advisory, investment advisory, project marketing, maintenance of completed projects, engineering, industrial and technical consultancy, construction and development of real estate properties and other related and ancillary activities.

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