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Mumbai | Bengaluru: The Embassy Group is reconsidering its plan to buy a majority stake in Indiabulls Real EstateNSE 4.97 % a day after Mint Road rejected the proposed merger of Lakshmi Vilas BankNSE -4.76 % with Indiabulls Housing FinanceNSE 16.80 %, “We are not looking at either increasing the stake or even exiting the investment already made,” Jitu Virwani, chairman, Embassy Group, told ET. “We will continue to remain an investor in Indiabulls Real Estate.”

Embassy owns 14 per cent in the Mumbai-based property developer, and the stake was acquired recently in a bulk deal. This was the first of a three-step transaction that would have allowed Indiabulls Group promoter Sameer Gehlaut to exit the real-estate company.

Gehlaut owned more than 39 per cent, and Embassy was expected to make an open offer to minority shareholders after the promoter’s exit, taking the total deal size to Rs 2,700 crore. As per the deal terms, Embassy was then expected to acquire Gehlaut’s balance equity of more than 24 per cent.

Indiabulls Group was looking to divest its real estate holdings completely with two key objectives: One, turning Indiabulls Real Estate into a zero-debt entity and two, to adhere to the central bank requirement of no exposure to the property business to secure the approval for its merger with Lakshmi Vilas Bank.

The company has so far managed to reduce its debt by 70 per cent and is aiming to turn debt-free in the current fiscal.

Meanwhile, the central bank’s rejection of the merger proposal has raised fresh concerns about the housing finance company’s fund-raising capabilities as liquidity remains scarce. Analysts believe that the Indiabulls stock, which closed at a more than a five-year low of Rs 195 apiece on Thursday, will remain under pressure, although a share buyback could cushion any fall.

“We are very unsure now,” said Macquarie in a note. “Since most market participants are reluctant on giving them money, this rejection further jeopardises the funding situation for IHFL. We don’t think organisations can survive by only selling loans.”

The company’s board would meet on October 14 to consider a share buyback. According to industry experts, Indiabulls Real Estate may have to consider other options if it is keen to further dilute the promoter’s stake or change the deal’s structure. Indiabulls Real Estate declined to comment.

The realty company has already sold its commercial portfolio completely to Blackstone for more than Rs 9,200 crore in two tranches. In the first round, the US-based private equity major had bought 50 per cent of this 5-million-sq-ft portfolio for nearly Rs 4,750 crore in March 2018, while the agreement for the balance 50 per cent stake was concluded at a consideration of Rs 4,420 crore.

“While the Reserve Bank decision on the proposed merger with Lakshmi Vilas Bank is disappointing, the merger was with a view to realize the generally expected long-term progression for a lender to be a universal bank…The company continues to remain on very strong footing,” Indiabulls Housing Finance said in a statement.

[“source=economictimes”]