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The proposed merger between Bengaluru-based Embassy Group and Indiabulls Real Estate (IBREL) announced in 2020 has been stalled due to objections raised by the Income Tax department. The National Company Law Tribunal in Chandigarh withheld approval for the merger of certain assets based on these objections. While the decision has been challenged at the NCLAT, the prolonged delay in completing the merger is seen to be impacting Embassy Group's expansion plans. The merged entity would have had a large land bank and development potential to undertake new projects worth Rs. 11,000 crore, but this remains on hold until the legal issues are resolved.
Indiabulls Real Estate (IBREL) and Embassy Group's merger was stalled by an order from the National Company Law Tribunal, Chandigarh bench in 2023 based on the objections cited by the Income Tax department to the merger. The objection was challenged at the National Company Law Appellate Tribunal (NCLAT) but the decision is still pending. The prolonged delay in completing the proposed merger is seen to be hampering decision making and impacting Embassy Group's growth plans. Advertisement
In August 2020, Bengaluru-based Embassy Group had entered into an agreement to merge some of its residential and commercial projects with IBREL through a cashless amalgamation scheme. This would make Embassy Group the promoter of the merged entity. The vision of the proposed merger was to create a strong development vehicle to house all future developments.
In February 2021, CCI had approved the merger. The merger scheme was approved by other regulators and 99.99% of IBREL shareholders. IBREL informed exchanges that the NCLT Bengaluru bench, which has jurisdiction over the Embassy Group assets, had also sanctioned the merger in April 2022. However, in May 2023, the NCLT Chandigarh bench withheld sanction for the merger of certain NAM Estates Pvt Ltd (NAM Estates) and Embassy One Commercial Property Developments Pvt Ltd (Embassy One) into IBREL.
Embassy Group Chairman Jitu Virwani said they have addressed all details and clarifications sought by NCLT regarding the assets. An undertaking had also been given that any past tax issues will be borne by Embassy Group, not IBREL shareholders.
At present, Embassy Group has around 14% stake in IBREL and the same will increase to 45% after the merger of assets of these two companies. Post-merger, the combined entity will have 80.8 million square feet of launched and planned development potential. The merged entity will have about 30 projects.
IBREL has a land bank of 3,280 acres, near major metropolitan cities. It has a presence in six cities - Delhi-NCR, Mumbai Metropolitan Region (MMR), Jodhpur, Vadodara, Vizag and Indore.
IBREL recently raised more than INR 3,911 crore through a preferential allotment to a diverse group of investors, including Embassy Group and Blackstone. Post investments, Embassy Group will hold 18.7% and Blackstone 12.4% stake in IBREL.
Virwani said that Embassy Group plans to launch at least five projects worth INR 11,000 crore worth of projects in the merged entity in the current fiscal. The estimated surplus for the projects is Rs 6,500 crore, as IBREL will have ownership of most of the lands involved in the projects with an estimated surplus of INR 6,500 crore. The approval for the merger will boost further growth plans.
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