Mumbai

Realty developer Indiabulls Real Estate has approved merging certain ongoing, completed and planned residential and commercial projects of Embassy Property Developments with self.

Embassy is in discussions with financial investors such as The Blackstone Group Inc. and others to raise up to $200 million before the said merger. This equity investment of $200 million will bring significant cash in the merged entity for expanding its business operations.

The merged entity will be the development arm for both commercial and residential assets, Indiabulls Real Estate said in a regulatory filing.

Under the proposed merger, certain ongoing, completed and planned residential and commercial projects of Embassy will get merged and stand transferred to Indiabulls Real Estate.

Last year, Embassy Group was in talks to buy a majority stake in Indiabulls Real Estate. Embassy had later stated that it is reconsidering the plan, but will continue to remain an investor in Indiabulls Real Estate.

Embassy owns 14% in the Mumbai-based property developer, and the stake was acquired in a bulk deal last year. This was the first of a three-step transaction that would have allowed Indiabulls Group promoter Sameer Gehlaut to exit the real-estate company.

Gehlaut owned more than 39%, and Embassy was expected to make an open offer to minority shareholders after the promoter's exit, taking the total deal size to Rs 2,700 crore. As per the deal terms, Embassy was then expected to acquire Gehlaut's balance equity of more than 24%.

Indiabulls Group was looking to divest its real estate holdings completely with two key objectives: One, turning Indiabulls Real Estate into a zero-debt entity and two, to adhere to the central bank requirement of no exposure to the property business to secure the approval for its merger with Lakshmi Vilas Bank. The Reserve Bank of India, in October, rejected Indiabulls Housing Finance’s proposal to merge with Lakshmi Vilas Bank

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.

Under the proposed merger now, Indiabulls Real Estate will issue its equity shares of face value of Rs 2 each to the shareholders of Embassy, which is a privately held company.

The swap ratio for this would be approved by the board of both the companies, resulting into the shareholders segment such as Indiabulls Real Estate's existing shareholders and Embassy shareholders' including. Embassy promoters, Blackstone and financial investors.

Indiabulls Real Estate's board has constituted a Reorganization Committee to examine and evaluate the options to implement the aforementioned merger proposal. These include appointment of valuers, merchant bankers, and other intermediaries to prepare and present a draft scheme and related documents, including the valuation report(s), fairness opinion, share swap ratio etc, to be placed before the Board within 4 weeks for its consideration and final approval.

Indiabulls Real Estate has delivered over 24 million sqft commercial and residential projects and has sold some commercial assets to Blackstone for around Rs 12,250 crore in the last 2 years.

The near-completion and under-development projects of the developer totaling 32.7 million sqft is expected to generate sales of around Rs 22,750 crores and net surplus of over Rs 11,000 crores. Additionally, the company holds land bank of over 1,900 acres and a Special Economic Zone (SEZ) of 1,424 acres, Indiabulls said.

Embassy Group has presence in commercial, residential, hospitality segment across Indian and international markets and has many operating projects. It has developed over 54 million sqft commercial, residential, retail, hospitality, services, educational and industrial warehouse spaces and holds land bank of more than 1,000 acres across the country.

Embassy Office Parks REIT, a joint venture of Embassy and Blackstone, is India's first listed real estate investment trust and has a market cap of over Rs 32,000 crores.

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