The article has raised several questions, most of which IBREL spokesperson has answered. Now whether you trust the explanation is upto you.
Summary of IBREL’s response published in the article:
- Construction on the land (One Indiabulls project) has become unviable because of regulatory changes
- Originally they had 70 acres of land in Sector 104, half of which was sold to Her Group in 2020 for 140 cr. There were no takers for the other half since 2 yrs, not even Hero
- Dhani paid 240 cr for 35 acres while Hero paid 140 crs
- Moreover, new Management has decided to exit Gurugram market completely by 2024 and concentrate on Mumbai, its core market, hence it has been selling land whenever possible. It will continue to do sell the remaining land parcels.
Pertinent points raised by the Journalist:
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Even as late as Nov 2022, in the latest Investor presentation IBREL mentioned that net surplus from One Indiabulls project was Rs. 1868 cr (ref: pg 19).
(My comment: How come within a month IBREL found that the piece of land is worth only 240? Also, IBREL sold half of land 2 yrs ago for 140 and have been trying to sell rest, then why you mentioned in the Nov presentation that the project will fetch you net surplus of Rs 1868 cr, when you knew that the land wasnt finding any takers? How reliable is the rest of Net surplus figure?) -
As per Aug presentation (ref pg: 12), Gross Development value (anticipated revenue) of the land was reported to be Rs 880 cr
(My comment: Land in acres is mentioned as 25 not 35. In Aug you say its 880 cr but in Nov presentation (ref: pg 19) you say unsold inventory and net surplus is 2926 cr and 1868 cr respectively ) -
IBREL made investments of Rs 534 cr in one of the two subsidiaries sold, including 110 cr just 2 weeks before the sale transaction.
(IBREL response: There was no new investment and only a loan was converted to equity so that the sale transaction could be completed. Now there is no loan/debenture to be redeemed/converted into equity pending between IBREL & sold subsidiary.) Journalist disputes this claim based on RoC papers
My take: Maybe what IBREL is stating as the reason for the undervaluation of the deal is accurate but why have they been throwing around such big Net Surplus numbers around eventhough they knew the issues plaguing the land?
Disclosure: IBREL is a big position in my PF. I have not yet made up my mind to sell and wait for clarity or continue holding. I understand RE space, especially in India, is muddled and sometimes we need to ignore a few things and not expect everything to be Kosher.
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