IndiaBulls Real Estate Ltd said on Friday it will merge with itself some housing and office projects of Embassy Property Development Pvt. Ltd in a transaction that is backed by private equity giant Blackstone Group Inc.
The multi-layered deal involves Embassy transferring some of its projects to Indiabulls in an all-stock deal and raising $200 million (about Rs 1,400 crore) from Blackstone and other financial investors to infuse in the merged entity.
“This equity investment of $200 million will bring significant cash in the merged entity… for expanding its business operations,” Indiabulls said in a stock-exchange filing.
Under the proposed merger, Indiabulls will issue its shares to the shareholders of Embassy as per a swap ratio that has yet to be decided. The Indiabulls board has set up a committee to evaluate options to implement this merger.
The development appears to be an about-turn for Indiabulls, which last year sold its commercial projects to Blackstone in several separate transactions and said that it would exit the real estate business.
The plan to exit the real estate sector was part of a wider strategy that involved another Indiabulls group company entering the banking sector through a planned merger with Lakshmi Vilas Bank. However, that merger fell through.
In its efforts to seal the bank merger, Indiabulls Group had divested a 14% stake in the real estate arm to Embassy. Embassy was to acquire the remaining 24% stake held by promoters in Indiabulls Real Estate later and make an open offer to public shareholders. The collapse of the bank deal derailed this plan.
However, even after the bank deal was scrapped, Embassy decided to retain its stake in Indiabulls Real Estate.
Blackstone and Indiabulls Real Estate have struck a couple of deals already in the past two years. Indiabulls sold a 50% stake in some office properties to Blackstone in 2018, and divested the remaining stake in 2019.
Meanwhile, Embassy also owns a number of residential and office projects in joint ventures with Blackstone. The transaction with Indiabulls may involve the transfer of some of these projects.
Embassy and Blackstone have also formed a real estate investment trust, Embassy Office Parks REIT, which floated its initial public offering last year.