Sameer Gehlaut to hike stake in Indiabulls Real Estate by 10% for Rs 538cr

In one of the largest promoter-led fund infusion in the real estate sector in recent times, Sameer Gehlaut, the founder and promoter of Indiabulls Real Estate (IBREL) is investing Rs 538 crore to increase his stake in the company from 27% to 37% through preferential allotment. Gehlaut is picking up the stake through a combination of equity shares and convertible warrants at Rs 67 per share, compared to IBREL's Friday closing price of Rs 42 on BSE, a premium of 59.5%. There are indications that in future Gehlaut will hike his stake in the company further.

Nearly a year ago, the three founders of Indiabulls group - Gehlaut, Rajiv Rattan and Saurabh Mittal - had spilt their businesses. Following the split, the aggregate promoter's stake in IBREL, a company that remained with Gehlaut, had dipped to 37.7% from nearly 49% earlier, BSE disclosures showed. Of the 37.7% promoter holding, Gehlaut had 27% while 10% was held by IBREL trust. Post this capital infusion, Gehlaut's holding in the company will rise by 10 percentage points.

"I would like to consolidate my holding in Indiabulls Real Estate over a period of time while Indiabulls Group consolidates its presence in housing finance and real estate," Sameer Gehlaut, chairman , Indiabulls Group told TOI. "This capital will strengthen the company's balance sheet, provide it with growth capital to start delivery of 6 million square feet of real estate space in the current fiscal and also help reduce its debt by about 20%," Gehlaut said.

IBREL, one the leading real estate developers in the country, is primarily focused on the National Capital Region, Mumbai Metropolitan Region and Chennai. In the last one year, as part of its geographical diversification strategy, it also spent nearly Rs 1,600 crore to acquire a property in central London. Unlike its peers, the company has been conservative in taking debt with a current net debt-to-equity ratio at 0.76, a company official said. "Low debt-to-equity is also a key reason why IBREL enjoys a AA- long-term rating, which is the best amongst its peer set," the official said.

The promoter fund infusion comes at a time when most of industry leaders are struggling with stagnant to dipping prices, huge pile up of debt as well as inventory of real estate space. These factors are also restricting real estate companies from raising equity. IBREL plans to use the funds from its promoter to its advantage by negotiating better terms on its existing debt, the official said.

Currently IBREL has 29 million square feet under development. "Historically, we have maintained strict financial discipline, focusing on cash flow generation. This growth capital will further enhance our ability to generate cash flow while significantly enhancing balance sheet strength," Gehlaut said.

n Dalal Street too, most of the real estate stocks have been struggling for the last couple of years although the benchmark indices have given strong returns. Compared to a 47% return in the sensex in the last two years, the real estate index has lost about 6%, BSE data showed.

SOURCE: THE TIMES OF INDIA