A strong wave of merger mania seems to have gripped corporates in the real estate sector.

Over half-a-dozen corporates, who are in the process of raising funds, are merging their real estate subsidiaries with parent companies to create value. The leading companies bitten by the merger bug include Peninsula Land, the Ajmera Group, Lok Housing, Orbit Corporation, SAB Industries and Satra Properties.

These companies are either merging their real estate subsidiaries or special purpose vehicles (SPVs) with themselves. Many of these firms are in the process of mobilising funds through private placement with private equity funds. The Ashok Piramal group-promoted Peninsula Land has just concluded the merger of its subsidiary Dawn Mills Company, in a move aimed at consolidating the group’s real estate businesses under a single entity.

Similarly, the Ajmera Grouppromoted Shree Precoated Steel is in the process of restructuring, which will see the merger of its all real estate business with the steel firm. Orbit Corporation is also believed to be merging three of its subsidiaries — Orbit Constructions and Realtors, Orbit Buildcon and Realty and Orbit Housing — with itself. The firm is currently exploring fundraising options in the overseas market.

Infrastructure and real estate firm SAB Industries is merging with its own group firm Steel Strips and Tubes. Recently, New Delhi-based Anant Raj Industries also amalgamated four subsidiaries with itself. Mumbai-based Lok Housing & Constructions is also in the process of consolidating its operations by merging three group companies. Sometimes, corporates do not get the valuation they deserve. This may force them to merge their group companies with themselves to create value. The value addition will help them tap the market to mobilise huge funds for expansion.

"Till now, each of our real estate projects were implemented under an SPV. But in the changing scenario, we needed a change in the corporate strategy. The merger will help improve our image and also bring in better cash flows," said Dhaval Ajmera, director of Mumbai-based real estate firm Ajmera Group. Senior Peninsula Land officials said the merger of Dawn Mills with the company will boost its saleable land bank and help develop their future real estate projects.

Source: Economic Times-06/08/07
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