The arrival of the coronavirus vaccine along with low interest rates and concessions in stamp duty for registration of properties has been leading to a revival in the Indian real estate market. There are many large real estate companies in the country such as DLF, Tata, Godrej, Oberoi, Sobha, Prestige, India Bulls, etc. The surprising revival in the housing market post the pandemic has propelled these company stock prices to nearly double in the last one year. The India Bulls Group was set up in 2000 with interests in housing finance, securities, real estate, power and construction equipment leasing. India Bulls Real Estate Ltd was formed in 2006 to focus on the development of commercial, residential and SEZ projects in the country. The company became a listed entity with a well diversified presence in the residential real estate market catering to the mid income, premium and the luxury segment. A few years back India Bulls Housing Finance Ltd had made a foray to enter the banking sector by acquiring Lakshmi Vilas Bank. The application to RBI for the proposed merger was declined by RBI because of the Group’s exposure to the real estate sector. This made the company firmly decide to completely exit from the real estate business and then seek fresh approval from the RBI. India Bulls Real Estate has been reducing stakes for quite some time now to reduce its debt levels. First it sold off a 14% equity stake to the Embassy Group for Rs 950 crores and later sold off its complete commercial real estate portfolio to the Blackstone Group for Rs 12,250 crores. To complete the disinvestment, the company sold off its London property for around Rs 1800 crores. The consolidation is leading the company to concentrate on the Mumbai and NCR region real estate markets. India Bulls Real Estate had last year announced that it wanted to completely exit from the real estate business and concentrate on the financing business. Hence it entered into amalgamating agreement with the Embassy Group to merge the company with the latter’s two subsidiaries. The Embassy Group is in India for over 25 years and has developed large real estate projects in the commercial, residential, hospitality, retail, educational and industrial warehouse segments holding an extensive land bank of over 1,000 acres across the country. The combined merged entity will be known as Embassy Development Ltd. with the Embassy Group owning a 44.9% equity stake, 26.2% by existing shareholders, 9.8% by the India Bulls Real Estate promoter group, 19.1% by Blackstone and balance by other institutional investors. The new listed entity Embassy Development Ltd will have a solid block of commercial and residential assets in prime areas of Mumbai and NCR regions. For the India Bulls Real Estate company, there will be no cash inflow and no tax liability during the proposed merger. Similarly for the Embassy Group, it will become a listed entity without making an open offer. The Embassy Group management have recently announced that the scheme of merger has received necessary approvals from CCI, SEBI and the stock exchanges.
India Bulls Real Estate delivered decent Q4FY21 financial results with a net profit at Rs 94 crore as against a net loss of Rs 109 crore in Q4FY20. Net sales for the quarter zoomed 529% y-o-y to Rs 731 crore. Analysts and fund managers are bullish on the stock and expect it to appreciate to Rs 240 levels in the next one year time frame.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.