The board of Indiabulls Real Estate Ltd. (IBREL), at its meeting held on Monday, has considered the possibility of streamlining the existing residential, commercial and leasing business of the company.
There is a proposal for either segregation of commercial real estate and leasing business of the company into to a separate holding company called Indiabulls Commercial Assets Ltd. (IBCAL) or reorganising the existing businesses by way of a demerger of the company on a going concern basis.
New entity listing
Post demerger, the residential business will stay with IBREL while the commercial and leasing business will go to the new company which would be listed on the stock exchanges.
The objective of this exercise is to bring greater focus on each of the businesses, the company said.
“The commercial and leasing business vertical to be created under IBCAL as a separate holding company, in case of restructuring will seek listing,” IBREL said in a filing with the stock exchanges. “It will undertake the commercial and leasing business and would be primarily focused on annuity business through rental income,” the statement added.
It said the residential business vertical would be primarily focused on earning profits and return on equity from the business of selling property. The board has constituted a restructuring committee to consider, examine and evaluate the feasibility of the options for the proposal. Based on the recommendation of the committee, the board would take the appropriate decision at a later date, it said.
Post restructuring, IBCAL will have a networth of ₹2,311 crore and net debt of ₹3,950 crore. In 2017-18, it will earn an annuity revenue of ₹692 crore which is projected to grow to ₹1,357 crore in 2020-21, the company said.
The net debt of the new company will be reduced over the medium to long term with income from annuities.
“We believe this model will provide cheaper of capital to fund the expansion of business after 2020-21,” the company said in a presentation.
After restructuring, IBREL will have a networth of ₹2,380 crore and net debt of ₹4,395 crore which is projected to be reduced and be capped at ₹2,000 crore in the next 12 to 18 months. This company will have 17 residential project including the Blu project at Worli in Mumbai.
Foreign investor
“Indiabulls will also be looking at getting a foreign investor or PE fund to participate in the equity of IBCAL,” said Abhishek Lodhiya, Senior Equity Analyst, Angel Broking.
“Most large global investors have preferred to participate in the commercial and leasing market in India as the retail space has been going through a very sluggish phase with tepid demand. Markets are expecting value discovery for Indiabulls Real Estate through this move,” he said.
The company’s stock reacted positively to this development and rose 39.96% to close at ₹148.15 on the BSE.
