Indiabulls Real Estate plunges 24% in 2 days after NCLT withholds merger

Shares of Indiabulls Real Estate (IBREL) continued losing streak for the second straight session on Wednesday with the share pricing falling as much as 24% in two days amid concerns about the delay in the merger of Embassy Group's arm NAM Estates and Embassy One Commercial Property Developments (Embassy One) within the company. The Chandigarh Bench of the National Company Law Tribunal (NCLT) on Tuesday withheld its sanction for the merger of NAM Estates and Embassy One with IBREL, citing concerns based on the objections cited by Income Tax department to the proposed merger.

After hitting a 20% lower circuit in the previous session, Indiabulls Real Estate shares declined as much as 4.8% to ₹52.70 on the BSE against the previous closing price of ₹55.34 on the BSE. The market capitalisation of the smallcap stock dropped to ₹2,946 crore.

IBREL shares trade 15% higher than its 52-week low of ₹45.94 touched on March 29, 2023, whereas it is down 44% from its 52-week high of ₹94.70 hit on September 8, 2022. The realty stock has tumbled over 28% in a year, 30% in six-month, and 2.5% in a month. On the year-to-date (YTD), the counter has lost 34.5% as compared to 3.5% and 0.8% rise in BSE Realty index and BSE Sensex, respectively.

In an exchange filing on Tuesday, IBREL informed its shareholders that the sanction to the merger of NAM Estates and Embassy One into the company has been withheld by the NCLT, Chandigarh Bench. “It is pertinent to note that the merger already stands sanctioned by the Hon’ble NCLT, Bengaluru Bench, which has jurisdiction over NAM Estates and Embassy One, on April 22nd 2022. However, the Hon’ble NCLT, Chandigarh Bench, which has jurisdiction over IBREL, had earlier raised certain concerns based on the objections cited by Income Tax department to the merger,”” it said in the regulatory filing.

IBREL further said that these objections and concerns were unfounded, unjustified and do not impact the merger in a significant manner and had accordingly addressed the same before the NCLT. The Mumbai-based company to take a call on the next course of action after reading the full judgement.

“The company will await the detailed order to further evaluate the next steps and shall explore all options, including filing an appeal against the order of the NCLT, Chandigarh Bench, before the National Company Law Appellate Tribunal (NCLAT) at the earliest,” it added.

As per the company, 99.9987% of its shareholders have voted in favour of the merger, which has already received approval from other regulators. “The board of the company shall be meeting over the next day to chalk out its plan and strategy to move forward and shall communicate the same to all its stakeholders,” it said.

In August 2020, Bengaluru-based realty firm Embassy Group signed a definitive agreement to merge its certain residential and commercial projects with IBREL through a cashless scheme of amalgamation. Embassy Group will become the promoter of the merged entity.  Embassy Group already has around 14% stake in IBREL and the same will increase to 45% post the merger of assets of these two companies. 

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