IVRCL to amalgamate BOT arms with IVR Prime

IVR Prime is the real estate division of IVRCL . IVRCL currently holds about 62.35% in the company. It is developing projects at about three locations as of now which is Nagpur, Bangalore and Coimbatore and they will be investing about Rs 200 crore over a span of next two years reports CNBC-TV18's Tejal Badal. These investments will be met by internal accruals and sell of a few of a scattered land that the company possesses at other locations.

You have trust like Bank of Japan holding 2% and HSBC Global Investments holding 4.5% in IVR Prime. Post their Q2 numbers, you had IVRCL coming out with this plan of restructuring wherein they were going to transfer all their BOT projects under their wing to IVR Prime.

Basically this has been done for two major reasons. One is that IVRCL promoters have only single-digit stake in the company as of now. They would not dilute it further considering the string of projects that would come their way, considering their thrust on the BOT space going forward.

Secondly, the merger would approve them for prequalification credentials in the BOT space on a very larger extent because IVR Prime has got a good networth of about Rs 1,000 crore as of March 2009.

There were analysts who believe that IVRCL could have separated these BOT projects into a 100% subsidiary and raised fund separately but a company believes that it was not a good time for taking this particular route in the current market situation.

A transfer according to the management would happen on asset value basis and not on market cap basis, thus putting to rest the questions on IVR Prime's valuation as of now.

Yesterday you had IVR Prime board come out and tell us that IVRCL strategic resources and IVRCL water infrastructures will now be merged with IVR Prime developers. What all this actually means is that beneficial interest in BOT projects will go down from 100% to 80%, beneficial interest in real estate projects would be increased from the current 64% to 80%.

So no substantial difference to minority shareholders as of now but the positive is that the company can now use a strong base of IVR Prime plus IVRCL Infrastructure's networth to bid for projects going forward and it also solves one of their big problems of funding. So it opens up a lot of opportunities for funding for the company going forward.