IBREL stock tumbles 20% after NCLT withholds merger of Embassy group firms with Indiabulls

The Chandigarh bench of the National Company Law Tribunal (NCLT) has withheld the merger of realty firm Embassy Group's certain residential and commercial projects with Indiabulls Real Estate (IBREL).

IBREL, in a regulatory filing, said that “the sanction to the merger of NAM Estates Pvt Ltd (NAM Estates) and Embassy One Commercial Property Developments Pvt Ltd (Embassy One) into IBREL has been withheld by the National Company Law Tribunal, Chandigarh Bench.”

IBREL said it will decide on the next course of action after reading the full judgement and will explore all options, including filing an appeal against the order of the NCLT before the appellate tribunal.

“IBREL’s board 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,” the company said.

After the development shares of Indiabulls Real Estate tumbled 20%. The shares closed at Rs55.34 apiece on the BSE.

On the NSE, the IBREL shares fell sharply by 20% to end at Rs55.40 per piece.

IBREL’s market valuation fell by Rs748.59 crore at Rs2,997.63 crore.

In August 2020, Bengaluru-based Embassy Group entered into 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.

The merger scheme has already been sanctioned by the NCLT, Bengaluru bench, which has jurisdiction over NAM Estates and Embassy One, on April 22, 2022, IBREL said.

“However, the NCLT, Chandigarh Bench, which has jurisdiction over IBREL, had earlier raised certain concerns based on the objections cited by the Income Tax department to the merger,” the company said. “IBREL strongly believes 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,” it said.

“We have provided all the necessary details and clarifications sought by the NCLT regarding the details of NAM Estates and Embassy One and have also meticulously addressed the objections cited by the Income Tax department, including giving an undertaking that any past tax issues will be borne by Embassy Group and not by the public shareholders of IBREL,” Embassy Group chairman Jitu Virwani said.

“This development is especially surprising, given that the merger already stands sanctioned by the NCLT, Bengaluru Bench, which has jurisdiction over NAM Estates and Embassy One and that other regulators, such as CCI, BSE, NSE, Regional Director and Official Liquidator have also approved the scheme,” he said.

In February 2021, the Competition Commission of India (CCI) approved the proposed merger of Embassy Group firms -- NAM Estates Pvt Ltd and Embassy One Commercial Property Developments Pvt Ltd -- with IBREL.