Godrej Properties pulls out of ₹700 crore deal with DB Realty
Premium- GPL said it plans to invest ₹400 crore in Mumbai-based real estate firm DB Realty to acquire around 10% stake through the issue of warrants
BENGALURU : Godrej Properties Ltd (GPL) on Friday said it will not proceed with the investment of equity capital in DB Realty Ltd and the plan to set up a joint redevelopment platform, a day after it announced the proposed transaction.
On Thursday, GPL said it plans to invest ₹400 crore in Mumbai-based real estate firm DB Realty to acquire around 10% stake through the issue of warrants. The GPL board had also granted its approval to setting up of a special purpose vehicle (SPV) as a joint venture with DB Realty to undertake slum rehabilitation and Maharashtra Housing and Area Development Authority (MHADA) redevelopment projects in Mumbai. GPL and DB Realty would invest ₹300 crore each into the equal partnership vehicle focused on redevelopment opportunities in the city, which would take the former’s total investment up to ₹700 crore.
“…The company received substantial feedback and views from its stakeholders and
minority investors raising concern on the proposed transaction with DB Realty, including with respect to the structure of the deal, rationale for the investment in D B Realty Limited and merits of investing through the platform," said GPL said in a regulatory filing on Friday evening.
The filing added, “After prolonged discussions and taking into consideration the feedback from the stakeholders and minority investors, the board has decided not to proceed with any further evaluation of potential investment in the equity capital of the DB Realty and the platform."
GPL said it would however continue to explore the possibility of evaluating projects with DB Realty on a case-to-case basis.
Analysts and investors came down heavily on the GPL senior management on a post-earning analyst call Thursday, questioning the rationale of making an entity-level investment in DB Realty, the promoters of which were accused in the 2G telecom spectrum scam. The company since then has been inking partnerships with other developers such as Bengaluru-based Prestige Group to monetize its large land bank.
Executive chairman Pirojsha Godrej said DB Realty has structurally improved its balance sheet, and of the ₹400 crore that GPL will invest, the former would invest ₹300 back into the redevelopment platform.
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“…We are not enthused by the proposed entity level investment in DB Realty by GPL and believe that this exposes GPL’s shareholders to entity level risks in DBR and greenfield slum rehab projects in Mumbai which are fraught with risks. In our view, direct SPV level investments by GPL after assessing project level viability is the ideal investment route," ICICI Securities Ltd said in a note.
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