Telecom giant Reliance Communications will demerge its real estate business into a separate listed company called Reliance Properties in an effort to unlock value of its headquarters in Mumbai, reports CNBC-TV18's Varinder Bansal. Reliance Communications' shareholders will be allotted Reliance Properties shares for free in the ratio 1:1.
Reliance Properties, which is valued around Rs 10,000-12,000 crore is likely to get listed within next three months. The total shares outstanding for Reilance Communication stand at 200 crore, so the shares of the new entity are likely to be valued at Rs 40 - 60/share.
According to the press release, the company has properties of about 150 acres, 125 acres in Mumbai and the remaining in Delhi. This roughly comes to about 20,000 square feet, which at the present rate seems a bit high.
Most of its listed entities are trading around 0.3-0.4 net asset value (NAV). So it becomes crucial to understand how the company has arrived at a figure of around Rs 12,000 crore for the properties it has.
The second key question is how much is used by Reliance Communications or associates and how much free area is with the company? So, if it has 150 acres or more how much is currently used by RComm itself and how much is free which they can generate revenues going ahead or not.
Third important point is what happens to the debt of RComm, whether it stays on RComm balance sheet or it gets transferred to Reliance Properties? The market says that certain portion of the Rs 40,000 crore debt on RComm balance sheet will go to RProperties, but one needs to wait and see what happens and what the management has to say.
It is a good move by the company as it is giving free shares to the RComm share holders. The time line is important here because it will take around three-four months to list RProperties and around two-four years for the company to monetize it.