Indiabulls Real Estate plans to hive off commercial business

Mumbai-based developer Indiabulls Real Estate Ltd said on Monday it plans to hive off its commercial and leasing business as part of a restructuring process to bring greater focus on different segments.

The company plans to place the commercial and leasing business under Indiabulls Commercial Assets Ltd, it said in a stock-exchange filing after a board meeting.

Indiabulls Commercial will be created either as a separate holding company under Indiabulls Real Estate after a restructuring exercise or will be created after a demerger of the commercial and leasing businesses and will be separately listed.

Indiabulls Commercial will undertake the commercial and leasing business and will focus on the annuity business through rental income of existing portfolio, projects under development and future projects.

The residential segment will remain with Indiabulls Real Estate and will focus on earning profit and return on equity by selling housing properties.

The company said that its board has constituted a committee to suggest feasibility and options to implement the business restructuring or reorganisation process.

The commercial business of Indiabulls has a net worth of Rs 2,311 crore while its debt stands at Rs 3,950 crore. It expects its revenue to reach Rs 1,357 crore by 2020-21 from Rs 692 crore in the current financial year.

The move comes at a time when a host of developers are in the process of bringing strategic investors for their commercial and rent-yielding assets. The move by Indiabulls could also be a precursor to bringing an investor on board for the commercial segment.

DLF Ltd, which has one of the biggest portfolios of commercial assets in the country, last month signed an agreement with Singapore sovereign wealth fund GIC Pte Ltd to sell a 40% stake of its promoters in its rental arm. The proceeds will help the company pare its debt and create a partnership to list the assets as Real Estate Investment Trusts.

In February, private equity firm Blackstone bought into commercial assets of Mumbai-based K Raheja Corp.

The move by developers to leverage their commercial assets comes at a time when the residential real estate market has been going through a sluggish phase for more than three years with sales remaining tepid and inventory staying high.

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