Indiabulls Real Estate Ltd shares extended gains for a second day on media reports that the Indiabulls Group is set to exit the real estate business to focus on the core financial services division. The stock gained as much as 10% on Friday after closing 6.5% higher on Thursday. However, by 11:30am, the stock erased all its gains to trade flat.
Ajit Mittal, executive director of the Indiabulls group, told CNBC-TV18 on Friday that Indiabulls Real Estate promoters have sold around 12% stake in the company to Embassy group. The group is now working on getting regulatory approvals for the proposed merger of Indiabulls Housing Finance with the Lakshmi Vilas Bank, he added.
“Our Group has predominantly been a financial services group. Real estate was a latter-day entry. So we want to focus on the financial services part and for us evolution into banking is the natural frontier and it’s all in the public domain, we have kick-started the process of doing a voluntary amalgamation with Lakshmi Vilas Bank; the idea is to create a world-class bank,” said Mittal.
Meanwhile, Embassy group chairman and managing director Jitendra Virwani also told CNBC-TV18 that the company plans to buy up to 28% stake in Indiabulls Real Estate eventually, adding that the effort will be to try and synergize businesses of both companies for future growth.
On Thursday, it was widely reported that US-based investment firm Blackstone Group Lp and Bengaluru-based property developer Embassy Group are set to jointly acquire Indiabulls Group chairman Sameer Gehlaut’s 39% stake in Indiabulls Real Estate at an estimated enterprise value of around $1 billion.
According to reports, 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 Indiabulls Real Estate.
Of late, Indiabulls Real Estate has been selling its commercial assets to Blackstone. In December 2018, it sold 50% stake in two office assets in Gurgaon to Blackstone at an enterprise value of Rs 464 crore. Earlier in the same year, Indiabulls had also sold 50% stake in its two prime commercial assets in Mumbai to Blackstone for an enterprise value of Rs 9,500 crore.