Indiabulls Real Estate’s Promoters Sell 12.8% Stake To Embassy Group
Indiabulls Real Estate Ltd. has sold a portion of its promoter stake to Embassy Group Ltd., the company’s Executive Director said.
Indiabulls Real Estate Ltd. has sold a portion of its promoter stake to Embassy Group Ltd., the company’s Executive Director Ajit Mittal told BloombergQuint.
The company sold 12.8 percent of its promoter stake—or 5.8 crore shares—at Rs 139.25-145 apiece through multiple block deals, fetching between Rs 807-840 crore, according to Bloomberg data. The deal is at a premium of nearly 6-10 percent compared with the stock’s closing price of Rs 131.40 on Thursday.
Shares of the Mumbai-based real estate company rose as much as 10 percent to Rs 144 apiece after the block deals but pared all of their gains to trade little changed as of 11:50 a.m.
The company informed the exchanges on June 6 that the promoters intended to transfer up to 14 percent out of the 38.72 percent fully paid-up share capital owned by them to third-party investors as part of their strategy to focus on the financial services business in the long run.
A joint venture comprising the Embassy Group and Blackstone Group LLP may buy an additional 15-24 percent stake in the company, the Times of India reported, citing people close to the deal. It will be followed by an open offer, the report said.
Speaking to BloombergQuint, the company’s Executive Director Ajit Mittal said he cannot indicate a timeline when the promoter group would fully divest its stake.
Watch the conversation with Mittal here:
Here’s the edited transcript:
The data indicates that close to 13 percent stake has changed hands in Indiabulls Real Estate. Can you confirm if the promoters have sold the stake and who the buyer is?
Your information is correct. A promoter, Mr. Sameer Gehlaut, sold a part of his stake to Embassy Blackstone JV. As part of his plan to cease to be a promoter of real estate business going forward.
The other part is that promoters own close to 38 percent stake in the company. Will there be further tranches and if yes, when can they happen?
On that, at this point of time, I wouldn’t be able to comment. But yes, it’s part of his (Gehlaut’s) overall strategy to eventually exit the real estate given our thrust in the financial services business and also to remove any sort of hurdle in our amalgamation process with the bank.
Bloomberg data shows 12.8 percent exchanged hands. You had indicated 14 percent. Has the entire 14 percent been sold or only 12.8 percent?
I’m not really involved in the real estate side, I’m in the financial services side and wouldn’t be able to comment on the deal specifics. But I gave you the broad picture, which is what the rationale for the stake sale by the promoter is.
Was RBI one of the key reasons? Did they tell you to exit the business or was it voluntary, so that no hurdle comes in?
I was with the RBI for two decades, and that too in banking regulation and supervision. It’s not just the regulator in India, but also worldwide, who have inherent concerns with the real estate developers’ business being intermingled. That was the case in 2013, when we applied for a banking license. I believe that was also one of the given concerns. Also, given the fact that real estate development business is not one of the mainstay businesses of the group, much less than 20 percent of the assets and the revenue of the group. It wasn’t really part of our strategic vision, (which is) to emerge as a financial services player of a global size and reach. This was also across the strata, not just in lending business. We are also entering the insurance space. We are also one of the largest players in the fintech and the digital lending space. We also are one of the leading retail brokers. Now, from a mortgage lender, we are looking towards transforming into a full-services universal bank. So given all these things, it was desirable to consider exiting the space. That’s it.
Any other assets that you would be looking to sell at this point of time apart from the real estate business?
No. None whatsoever.
Reports that came in the Times Of India and the Mint indicated that the balance tranches will be done in the next one and a half to two months. Do you agree?
As I told you, I am not really involved in the nitty-gritty of the transaction as to what tranches and time intervals, so I won’t be able to comment on that. But yes, more or less, you can say that’s the trajectory.
The group is looking to exit the real estate business because of ongoing merger with Laxmi Vilas Bank. Is there any back up plan ready with the group if the RBI doesn’t give an approval for the merger? You are already exiting the real estate business to meet the norm of RBI because promoter cannot have any sort of exposure to the real estate business.
Let me give the perspective. First of all, the RBI approval is more in nature of a non objection certificate. This is a voluntary amalgamation under the Companies Act and as provided under RBI’s own directions. RBI has to carry out a fit and proper due diligence on company as well as the new promoter of the bank. Other than that, it is a process which involves the National Company Law Tribunal, the Competition Composition of India, exchanges under the Securities Exchange Board of India, and other stakeholders and in our case also the National Housing Bank. So, it is only one piece and that too in the nature of NOC. So, it is not a question of plan B or plan A or C. We are just following a path which is given. I don’t see any obstacle in that because had we got some doubt as to our eligibility and whether we are fit and proper, then we wouldn’t even have chosen to tread this path in the first place.
I know you are not involved in the nitty-gritty of this deal, but are you not even ruling out that promoters would further sell the stake?
To that extent, Mr. Gehlaut would cease to be the promoter of the real estate group and to that extent the stake sale will happen.
But he is still a promoter because he has just sold 13 percent stake and still has a majority stake.
He will cease to be the promoter in due course of time. The company will no longer be part of the Indiabulls Group. That’s all I can tell you. Until that happens, I can’t comment on how many tranches, the timeline and what percentage.
Why Embassy and the Blackstone Group? Which were the other companies that were considered?
A due process was followed over the last couple of months. There where bids invited and there were other few players as well. As part of that due process, this probably seemed to be the best fit and Embassy is one of most credible real estate developers. They have recently done a REIT, one of the hugely successful REITs and are JV partners with Blackstone. Blackstone has been already associated with us and they have a long history of working with us. They already own 50 percent in our rental assets portfolio, including the two marquee iconic projects in Mumbai which is One Indiabulls center and Indiabulls Finance center. There are also some assets in Chennai and Gurugram. So, they have already been working. They have fair amount of comfort level. They knew us inside out and that’s how this transaction was done with Embassy.
Will the existing promoter, Mr. Sameer Gehlaut, be allowed to hold a minority share in the company going ahead in case the merger approval comes from RBI?
As an investor if he holds some stake, there’s nothing (wrong). An individual can hold a stake in any company, and why only real estate company? As long as he is not involved in the management of the company....
Even if that investor is also a promoter entity within a bank?
He will cease to be so. This is a very laid down process. If you hold less than 10 percent then you de-promote yourself and you are no longer promoter of that listed company. So, that is very clear. He won’t even belong to that group. He won’t be on the board, none of us will be on board. That will be altogether different group there is no grey area on that.