Indiabulls Real Estate Ltd has approved the merger of certain projects of Embassy Property Developments with itself, to form a new entity.
With this merger, Embassy and its promoter Jitu Virwani will take control of the combined entity, which is yet to be named. Indiabulls Group will finally exit its real estate business through this, and its current promoter Sameer Gehlaut will become a passive shareholder and focus on its financial services business.
While Embassy will bring its ongoing, completed and planned projects on the new platform, it is also in discussion with its existing investors, including Blackstone Group Lp, to raise up to $200 million before the proposed merger. The fresh equity investment is expected to fund the merged entity’s expansion.
Embassy and the financial investor will receive shares of Mumbai-based Indiabulls Real Estate (IBREL), according to the share swap ratio approved by the two companies.
The final swap ratio of the merger is expected to be announced within four weeks after receiving the valuation reports from independent merchant bankers. IBREL has constituted a reorganization committee to examine and evaluate the options to implement the merger proposal.
“Under the proposed merger, certain ongoing, completed and planned residential and commercial projects of Embassy will get merged and stand transferred to IBREL. Some of Embassy assets are presently owned by entities managed and controlled by it jointly with Blackstone, for which it is in discussions with Blackstone to contribute such assets as part of the merger transaction," IBREL said on Friday.
After the merger, the shareholders of the company, promoters of Embassy and financial investors, including Blackstone will be IBREL’s existing shareholders. The merged entity will be the development arm for both commercial and residential assets, Indiabulls Real Estate said in a regulatory filing. Last year, Embassy had bought a 14% stake in IBREL in a bulk deal. The transaction was the first of a three-step transaction that would have seen Gehlaut exiting the real estate firm.
Indiabulls was primarily exiting the real estate business to make IBREL debt-free and to maintain no exposure to the property business to secure RBI’s approval for its merger with Lakshmi Vilas Bank. However, last October, RBI rejected the merger proposal of Lakshmi Vilas Bank and Indiabulls Housing Finance Ltd.