Indiabulls Real Estate up 40% on fund raising, biz revamp plans

It is rare for any stock to rise 40% in just one trading session

It is rare for any stock to rise 40 per cent in just one trading session. And, this feat has been achieved by Indiabulls Real Estate, which closed the day at Rs 148 a share on BSE as compared to its previous close of Rs 105.85.

The stock’s reaction follows the company’s announcement to reorganise its businesses and/or raise funds from marquee investors.

A source said Indiabulls Real Estate is in the process of raising funds from one of the global marquee funds. And, Blackstone, Brookfield, GIC, and Canada Pension Plan Investment Board are the global funds vying for such opportunities in India. The company on Monday said it would carve out its commercial and leasing business under Indiabulls Commercial Assets as a separate holding company. This is to bring in strategic investments, informed the company to the exchanges. The company said the new commercial firm will have a net worth of Rs 2,311 crore and net debt of Rs 3,950 crore after restructuring. It expects annuity revenue of Rs 692 crore in 2017-18 and Rs 1,357 crore by 2020-21 with leasable area of 8.35 million square feet by then. Indiabulls Real Estate owns 55 per cent in their assets estimated at Rs 14,000 crore. “They can divest 30 to 40 per cent in the holding company to one of the global private equity investors,” said the source. “Though the company has its Real estate investment trust listed in Singapore, it would not come in the way of divesting stake in holding company,” says the source.  

The company management could not be contacted despite repeated attempts.

At the end of September 2016, the company had net debt Rs 6,282 crore (adjusted for cash and bank balance). Prior to Monday’s surge, the company’s equity value (or market capitalisation) stood at Rs 5,064 crore. For the 12 months ended December 2016, revenue was down 16 per cent year-on-year to Rs 2,379 crore, net profit was up 16.8 per cent at Rs 376 crore.

Recently, the country’s largest property developer DLF got into an agreement with Singapore-based GIC to sell its 40 per cent stake in the rental arm DLF Cybercity Developers. Global private equity firm Blackstone was also in the race to buy the stake. Though Delhi-based DLF has not announced the deal value, it is estimated to be between Rs 10,000 crore to Rs 12,000 crore. 

The US-based Blackstone also entered into a deal with Mumbai-based K Raheja Corp to buy 15 per cent in their commercial arm for Rs 1,600 crore late last year.

In mid-2014, Indiabulls’ promoters split the real estate to power group set up by two IIT graduates and a common friend. Sameer Gehlaut got the control of companies including Indiabulls Housing Finance, Indiabulls Real Estate, Indiabulls Securities and Indiabulls Wholesale Services. 

Other promoters, Rajiv Rattan and Saurabh Mittal, got listed Indiabulls Power and unlisted Indiabulls Infrastructure and Power.

“Most large global investors have preferred to participate in the leasing market in India as the retail space has been going through a very sluggish phase with tepid demand,” says Abhishek Lodhiya, analyst, Angel Broking. “Markets are expecting value discovery for Indiabulls Real Estate through this move as evident from stock rally,” said Lodhiya.