DB Realty to soon hit the market with Rs 2,000 crore QIP

As part of its turnaround strategy, DB Realty also plans to demerge its hotel business to unlock value.

DB Realty Ltd plans to raise Rs 1,500-2,000 crore by selling shares to qualified institutional investors, two people aware of the property developer’s plans said.

The company plans to complete the fundraising, which comes after a gap of several years, in the coming weeks, depending on market conditions, the people said, requesting anonymity.

A successful fundraising could mark a turnaround for the company, once a prominent real estate developer in the Mumbai market. DB Realty’s troubles started when its promoters, Shahid Balwa and Vinod Goenka, were named as accused in the 2G spectrum allocation scam. They were later acquitted by a special CBI court in December 2017 due to a lack of substantial evidence. However, their prolonged legal battle resulted in delays in projects and lenders turning away.

The real estate developer has hired investment banks JM Financial and DAM Capital for the fundraising, the people cited above said.

“They are already engaged in talks with investors and are seeing good investor appetite. DB Realty wants to launch the deal as soon as possible, and it could get launched in the next few weeks,” said one of the sources cited above.

Also Read: DB Realty to demerge hospitality business, stock surges over 2%

A query sent to a spokesperson for DB Realty remained unanswered. Emails sent to JM Financial and DAM Capital too went unanswered.

DB Realty’s fundraising plans come amid the stock price surging 46% since the start of the year to Rs 267.70. In the past 12 months, the stock has risen fourfold.

The fundraising will lead to a dilution of 10-15% for the shareholders of the company. The promoters of the company owned 50.89% stake as of December 31.

While the stock has hardly any institutional shareholders, the late Rakesh Jhunjunwala’s family owns a 4.98% stake in the company.

The company issued warrants in 2022 to Jhunjunwala and other investors, including promoters, to raise funds. With the full conversion of these warrants into equity shares in 2023, the company raised a total of Rs1,544 crore, which was utilised to reduce its debt.

Funds to be raised from selling stocks to qualified investors will be used to reduce debt further and invest in new and existing projects.

In a recent notice to its shareholders, the company said it plans to use the funds for its real estate business.

“The proposed placement will bolster the company’s capital base and fortify its financial standing and net worth,” the notice said.

The company has been trying to revamp itself by partnering or monetising its assets for the last couple of years.

For the nine months ended December 31, DB Realty reported a consolidated net profit of Rs1,330 crore from a loss of Rs77 crore in the year earlier.

Standalone secured debt stood at zero, the company said in a statement announcing the December quarter results, while consolidated secured project-related debt at approximately Rs1,900 crore.

In FY24, the company sold its stake in two joint ventures with Bengaluru-based developer Prestige Estates Projects. Prestige bought DB’s stake in the two joint ventures for Rs1,176.5 crore.

In its earnings release, the company also said that it has entered into partnerships with Adani Property, Godrej, Prestige Estate, and Man Infra for the ongoing development of almost 16 million sq ft. of residential, hotel, and commercial properties.

As part of its turnaround strategy, DB Realty also plans to demerge its hotel business to unlock value.

On February 9, the company’s board said that the demerger would unlock the value of the real estate and hospitality business for shareholders, enable a differentiated strategy to capture the potential of the Indian hospitality sector and attract a distinct set of investors, partners, collaborators and leadership talent focused on the hospitality business.