DB Realty ropes in Rakesh Jhunjhunwala after Godrej calls off deal

Real estate developer DB Realty said its board has approved fundraising through issue of 50 million convertible warrants to non-promoter investors including Rakhesh Jhunjhunwala’s RARE Enterprises and Rekha Jhunjhunwala.

This comes days after Godrej Properties abandoned its plan to invest ₹400 crore in DB Realty for about 10% stake after brokerages – ICICI Securities and CLSA – cut its stock price targets, calling the proposed deal as “unwarranted”. The two entities had said that they would pump in ₹300 crore each to set up a special purpose vehicle to jointly undertake slum rehabilitation and Maharashtra Housing and Area Development Authority (MHADA) projects.

Shares of DB Realty hit the upper circuit level of 5% at ₹116 apiece on BSE after the announcement of new investors.

The Mumbai-based realty firm will issue 10 million warrants to Rekha Jhunjhunwala and 10 million warrants to RARE Enterprises, which is owned by Rakesh Jhunjhunwala, according to its stock exchange filing. The Jhunjhunwala family already owns 2.06% stake in the company as of December 31, 2021.

The company will further issue 10 million warrants each to Abhay Chandak and Aditya Chandak. It will also allot 5 million warrants each to Lotus Family Trust and KIFS Dealers.

The real estate developer plans to use the capital raised primarily to repay debt and augment long term capital requirement of the company.

The total fund infusion into DB Realty post conversions of warrants allotted and proposed to be allotted to Pinnacle Investments, promoters and new investors will be around ₹1575 crore, the realty firm says.

DB Realty said it will convene an extraordinary general meeting on March 4, 2022 to obtain shareholders' approval for the issue of these warrants.

Post the shareholder approval, new investors in the company will hold about 9.98% stake and Pinnacle Investments, which is largely owned by the Razack Family Trust, the promoter of Bengaluru-based Prestige Group, will hold 17.97% stake, the developer says.

The board of DB Realty had allotted 3,30,00,000 warrants to Pinnacle Investments and 9,75,00,000 warrants to promoters of DB Realty on February 2.

Each warrant is convertible into one equity share and the conversion can be exercised at any time within a period of 18 months from the date of allotment in one or more tranches, according to its filing.

An amount equivalent to at least 25% of the warrant issue price shall be payable at the time of subscription and allotment of each warrant and the balance shall be payable by the warrant holder on the exercise of the warrant at any time within a period of 18 months from the date of allotment, the company adds.

The realty developer, which has a portfolio of more than 100 million sq. ft. of real estate in Mumbai Metropolitan Region, expects to be debt free in the near term from having a peak liability of ₹4,142 crore.