Indiabulls To Sell More Stake In Real Estate Unit
Indiabulls Housing Finance considering stake sale in U.K.-based digital lender OakNorth.
Indiabulls Group promoters will further cut stake in the real estate arm in the next 30-45 days to pave the way for Indiabulls Housing Finance Ltd.’s merger with Lakshmi Vilas Bank.
“Another 15 percent would be sold (in Indiabulls Real Estate Ltd.) and Embassy Group which comes in would become its new promoter,” Gagan Banga, vice chairman and managing director at the non-bank lender, told BloombergQuint in an interview. The Sameer Gehlaut-led promoters sold 12.8 percent in the realty unit to the Embassy Group earlier this month.
The concerns about whether the Reserve Bank of India will allow Indiabulls Housing Finance’s proposed merger with Lakshmi Vilas Bank stem from the fact that the regulator has in the past frowned upon an overlap between the real estate and the banking businesses. The Competition Commission of India, however, approved the deal on Friday. Once the merger goes through, the morgtage lender will get access to low-cost deposits, geographical diversification and expanded client-base and cross-selling opportunities.
OakNorth Sale
Indiabulls Housing Finance is also considering selling stake in the U.K.-based digital lender OakNorth. The sale would be completed within 90 days in case the company wished to sell as the asset was “extremely liquid” and had other several deep-pocketed shareholders, said Banga. Japan’s Softbank Group invested about Rs 2,800 crore of equity capital in OakNorth earlier this year.
Real Estate Exposure
A majority of the non-banking lender’s loans extended to developers are backed by their rent-generating assets in the form of mortgage, Banga said. “This mortgage arrangement traps up a lot of (developer’s) equity.”
The company received Rs 1,650 crore from Radius Developers as a result of its sale of One BKC building to Blackstone, according to its exchange filing. The company does not have any exposure to Lodha Group, said Banga, adding that it had fully provided for Supertech’s exposure despite receiving Rs 25 crore every month.
In the last 20 years, the loss incurred after default will probably be the lowest for organised real-estate among all other sectors. This is because the collateral has very little to do with the end business’s fate. You recover only 30-50 percent of the loan if there is any issue with a power or a steel asset. I strongly believe real-estate will continue to be an asset class that would give least losses in case of a default.Gagan Banga, Vice Chairman and Managing Director, Indiabulls Housing Finance