US private equity giant Blackstone Group Lp and Bengaluru-based property developer Embassy Group are set to jointly acquire the stake of Indiabulls Group chairman Sameer Gehlaut in Indiabulls Real Estate Ltd (IBREL), a move that will also see Indiabulls exit the real estate business to focus entirely on financial services, said a person familiar with the transaction.
The Blackstone-Embassy joint venture will buy promoter Gehlaut’s 39% stake in IBREL for around ₹2,700 crore at an equity valuation of ₹7,000 crore.
The Blackstone-Embassy duo has come together for the Indiabulls deal, after Embassy Office Parks (a joint entity of Blackstone and Embassy) launched India’s maiden real estate investment trust (REIT) earlier this year.
The deal will be completed in three transactions with the Blackstone-Embassy combine taking a 15% stake this week, followed by the purchase of the residual stake over the next six to eight weeks. This will be followed by an open offer to the existing shareholders of IBREL.
Once the deal is completed, a quarter of IBREL will be held by foreign institutions while the remainder will be with public shareholders and mutual funds among others.
“From Indiabulls Group’s point of view, the company will now 100% focus entirely on Indiabulls Housing Finance Ltd," said the person mentioned above, who didn’t wish to be named.
This is not the first time Blackstone and Indiabulls have entered into a transaction.
In March last year, IBREL sold a 50% stake in its marquee office properties in central Mumbai to Blackstone for $730 million or ₹4,750 crore. The developer had then said it will use bulk of the money to pare debt.
Blackstone also bought IBREL’s commercial office property in Chennai One Indiabulls Park for around ₹900 crore.
“Once the deal is concluded, it will give Embassy and Blackstone access to IBREL’s residential assets too, which can be merged with Embassy’s residential portfolio," said a second person, who didn’t wish to be named.
In an analyst presentation in April, IBREL said its rental portfolio is ready for a REIT listing, which will provide an opportunity to unlock value.
In the past couple of years, IBREL has been streamlining its realty portfolio, exiting office and residential projects in markets such as Chennai, and deciding to focus primarily on Mumbai and the National Capital Region (NCR). In April, IBREL said it has decided to divest Century Ltd, the parent firm that houses the Hanover Square property in London, in order to pare debt and given the uncertainty surrounding Brexit.
“In light of continuing Brexit-related issues and uncertainty around it, the London property market remains sluggish. So, the promoter has undertaken to buy the parent company of London asset for £200 million," it added. The developer had purchased the property for £161.5 million in 2014.