Emami looks to consolidate real estate projects under two firms

Emami looks to consolidate real estate projects under two firms

Kolkata: Emami Ltd is consolidating its real estate projects across India in two listed firms to create two large companies that can raise financial resources with ease, chairman R.S. Agarwal said.

The Emami Group’s diverse real estate projects will be housed under the two firms: Emami Infrastructure Ltd (EIL) and Zandu Realty Ltd. The latter could be renamed to reflect the identity of the Kolkata-based group, according to Agarwal.

Under the restructuring, Emami Realty Ltd, a unit of EIL, is being carved out and merged with Zandu. That apart, two privately held firms, Emami Home Pvt. Ltd and Emami Estates Pvt. Ltd are also going to be merged with Zandu.

Zandu, an erstwhile herbal healthcare firm, is now a shell company after Emami acquired it in October 2008 and merged with itself its pharmaceutical business. Zandu currently has only one asset—the firm’s 2.75-acre erstwhile headquarters in Dadar, Mumbai.

A residential project, estimated to cost 700-800 crore, is being planned at Dadar, according to Agarwal. The property is currently being valued at 135 crore or so, going by Zandu’s market value.

“The two companies (EIL and Zandu) are to focus on different categories of real estate projects such as commercial and retail," said Agarwal, adding that, till now, Emami used to float project-specific firms.

The restructuring, which could take up to a year to be concluded, is aimed at integrating these firms to create two strong balance sheets, he said.

Ernst and Young and Anand Rathi Financial Services Ltd are advising Emami on the recast of its real estate business.

The merger of Emami Realty and two privately held firms would significantly shore up the promoter group’s stake in Zandu, according Rajesh Agarwal, head of research at Kolkata-based broking firm Eastern Financiers Ltd.

Emami owns 35.5% in Zandu. The group cashed out after carving out Zandu’s herbal healthcare business and currently owns less than half the number of shares that Emami had acquired three years ago for around 700 crore.

Emami Realty has a land bank of 103 acres, according to company data. “Its integration with Zandu will surely result in substantial increase in the promoter group’s stake," said Rajesh Agarwal.

The restructuring appears to be the first step towards ramping up Emami’s real estate business outside Kolkata, said a lawyer close to Emami, who did not want to be named. “The group appears to be preparing the ground to tap financial markets for its upcoming projects."

Emami is planning to start at least 15 real estate projects over the next three years in Kolkata, Coimbatore, Chennai, Hyderabad, Jhansi and Vapi near Mumbai, R.S. Agarwal said.

These include an information technology park to be developed in partnership with Anand Rathi Realty Fund and CD Equi Finance Pvt. Ltd, a Kolkata-based firm, at Rajarhat near Kolkata. The company is also developing a 4.46-acre residential project in Hyderabad with Anand Rathi Realty. It would build at least 510 homes.

In Kolkata, Emami’s other proposed projects include a 2.2 million sq ft. residential complex on the northern fringes, and a 500,000 sq. ft residential project on 5 acres at Rajarhat. The 2.2 million sq. ft residential project is estimated to cost 800 crore.

The group is also planning a real estate project in Colombo, according to R.S. Agarwal. He refused to provide further details about the project.