Thread by @may27capital

We came up with another write up this weekend on the merger between #IBREALEST and the embassy group. We have tried to cover all the aspects of the merger. Do give it a read and share your thoughts 🙂
A thread 🧵
#indiabulls
may27capital.substack.com/p/special-situ…

Indiabulls Real Estate Limited (#IBREALEST ) will be merged with the Embassy group to form “Embassy Developments Ltd” becoming one of India’s largest listed real estate companies.
1/n

It will be co-headquartered in Mumbai and Bengaluru. Post-merger, Chairman of #Embassy group Mr. Jitendra Virwani, and others will be classified as new promoters of the merged entity. Former promoter Sameer Gehlaut of IBREL group will be declassified as a promoter.
2/n

Overview of Embassy group:
#Embassy Group has developed 62+ Million Sq. Ft of Commercial, Residential, Retail, Educational and Industrial Warehouse spaces and holds an extensive land bank of 1,000+ acres across the country.
3/n

It was founded in the year 1993 by Jitu Virwani. He currently heads the group as Chairman and Managing Director.
▪️ It is a pioneer in leasing office space and developing integrated office parks with over 41 Mn Sq. Ft of commercial properties and 72 Mn Sq. Ft in development. 4/n

▪️The firm has developed over 12 Mn Sq. Ft of residential assets and over 17 Mn Sq. Ft is ongoing and future development.
▪️Their operations span across Indian and international markets that include Bangalore, Chennai, Hyderabad, Pune, Coimbatore, Trivandrum, and Malaysia.
5/n

▪️ #Embassy Industrial Parks is developing 10 Mn Sq. Ft with an potential of over 35 Mn Sq. Ft in the future to address the challenges of companies in building and managing industrial, warehousing spaces in 7 key cities like Bangalore, Chennai, Delhi NCR, Mumbai, and Pune. 6/n

JV with Blackstone:
In 2012, #Embassy Group and #Blackstone entered into a joint venture to form Embassy Office Parks that includes Embassy Golf Links, Embassy Manyata Business Park, Embassy TechVillage, and Embassy TechZone that houses internationally renowned corporates.
7/n

Overview of Indiabulls Real estate:
#IBREALEST was incorporated in the year 2006 operating in the construction and development of residential, commercial, and SEZ projects.
8/n

▪️ It currently has 19 projects spread over 25 Mn square feet. It has a construction-ready land bank of ₹ 3,353 acres and sold receivables of ₹3,094 crores.
▪️ It is leading residential real estate platform with total launched and planned area of 24.6 Mn sq. Ft.
9/n

▪️ ₹ 3,910 crores required to realize ₹ 11,059 crores of surplus from launched residential assets due to additional FSI potential for its projects.
▪️ Floor Space Index (FSI) is the maximum permissible floor area, that a builder can build on a particular plot/piece of land
10/n

▪️ 95% of the land operated by Indiabulls is residential.
▪️ The company has completed / near completion inventory worth ₹ 1,720 cr to address shifting buyer preference towards completed projects with Occupancy certificates.
11/n
#IBREALEST

Details of the Merger:

▪️ #IBREALEST to be valued at ₹ 92.50 per share and swap ratio to be 6.619 shares of IBREL for every 10 shares of NAM Estates Pvt Ltd (Embassy group).
12/n

▪️The merger is expected to be completed in the next 6 months by end of Q1FY23. Merged entity will have 31 projects across India with a planned area of 78.7 Mn sq. ft.
▪️The annual rent potential of commercial projects of the merged entity will be ₹ 4,291 Crs.
#IBREALEST
13/n

▪️ Merged entity will Diversify towards a balanced mix with 56% commercial and 44% residential properties.
#IBREALEST

Shareholding:
▪️Embassy group will hold -44.9%
▪️Existing public & institutional shareholders- 36%
▪️Blackstone- 19%
▪️Former promoter Mr. Sameer Gehlaut 0.1%

15/n
#IBREALEST

▪️ Merged entity will have a total land area of 78.7 Mn Sq.ft. While #IBREALEST will add residential projects, the embassy will have a huge commercial planned area.
▪️ The merged entity will have sold receivables of ₹ 4,244 crores.
16/n

▪️ The residential Net surplus of launched and planned projects will be ₹ 19,070 crores.
▪️ Net surplus is equivalent to pending collections from area sold plus the value of unsold inventories minus pending construction cost.
17/n

▪️ The merged entity will have 3,353 acres of land bank in India which is 2nd highest only next to #Macrotech developers.
#IBREALEST
18/n

▪️ In the below peer comparison is pre-merger and only values the assets of #IBREAL.
▪️ Despite being one of the leading players in residential projects, the book value of IBREL for FY24 estimates is just 0.5.
19/n

https://twitter.com/itsTarH/status/1472896574048989184

While #IBREAL has its residential assets spread over India in cities like Mumbai Metropolitan Region-MMR ( 12.2 Mn sq. ft) and National capital region-NCR (9.7 Mn sq. ft) the Embassy group has a large chunk of Commercial space in Bengaluru(52 Mn sq. ft).
20/n
#IBREALEST

▪️ Residential business to have a surplus from launched and planned residential projects exceeding ₹ 19,000 Cr
▪️ ₹ 3,899 Cr net investment to realize ₹ 13,806 Cr of surplus from launched residential assets.
#IBREAL #IBREALEST
21/n

▪️ Near completed inventory can generate a net surplus of ₹ 4,257 Cr post-merger.

▪️ ₹ 3,404 worth of projects (19% of total ongoing projects) have received occupancy certificates or near completion.
22/n
#IBREAL #IBREALEST

Conclusion:
The merged entity will have a great mix of commercial and residential assets spread over India. More than 3 decades of Embassy group’s experience in commercial RE projects in India and Blackstone’s backing with a 19% stake will augur well.
23/n
#IBREAL #IBREALEST

We currently have a small position in #IBREAL and would like to add more post successful conclusion of the merger. We will come up with a detailed deep Dive into the merged entity post-merger. This write-up is for educational purposes and not investment advice. Do ur own research

End of the Thread 🧵
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