Aditya Birla Real Estate Ltd (ABREL) on March 31 announced the sale of its Lalkuan-based paper division in Uttarakhand to ITC Ltd for Rs 3,498 crore — a deal value significantly above market expectations.
The move will help ABREL strengthen its financial position and accelerate its expansion in the real estate sector, which will now be its sole focus, analysts said.
The sale proceeds will be used to pay off long-term debt and distribute a special dividend to existing shareholders, the company said in a statement.
Shift towards real estate
ABREL attempted to divest the paper business in 2017 and again in 2024 but dropped the plan.
One of the key reasons for the delay was that the cash flow from the paper business funded real estate operations, sources said. However, in recent years, the real-estate division has become self-sustaining and no longer needs the cash flow of the paper business.
The cash generated from the paper deal will provide ABREL a significant competitive edge, industry analysts said.
"Becoming a debt-free real estate player is a rare feat and positions ABREL strongly in an industry where most developers rely heavily on leverage. This gives them the flexibility to pursue large-scale projects with joint venture partners," a senior real estate analyst said on condition of anonymity.
Growth prospects
With a strong balance sheet, ABREL is well-positioned to enter joint ventures with landowners and selectively take on new debt to expand its portfolio, analysts said.
The company aims to have projects with a gross development value of Rs 1 lakh crore within the next year, a milestone that will place it among the largest real estate players in the country.
Many existing developers do not even have half of this development value, another analyst said.
"This transaction not only unlocks capital for ABREL but also signals their confidence in scaling their real estate business independently. It paves the way for them to become a key player in India's real estate landscape," the analyst said.
The deal qualifies ABREL for inclusion in the real estate index, further solidifying its position as a key player in the sector, experts said.
Where does ABREL stand?
In FY24, ABREL recognised Rs 832 crore in revenue from its fledgling real estate business, with recognition for most of its marquee, high-topline projects still a few years away.
Real estate firms are required to recognise revenue from the sale of a property once it is handed over for possession to the buyer in case of outright sales.
It earned an operating profit of Rs 199 crore from the segment in FY24. For the first nine months of the FY25, ABREL reported Rs 777 crore revenue.
A Mumbai-based real estate observer said besides aggressive business development, the company has also carried out extensive hiring for specialised business development and sales roles since the end of the COVID-19 pandemic.
According to the company's latest investor presentation, ABREL has development agreements and land parcels that can fetch more than Rs 63,000 crore in revenue across four regions — the Mumbai Metropolitan Region, the National Capital Region, Pune, and Bengaluru.
The company's most visible project is the ultra-luxury Birla Niyaara in Mumbai’s Worli, which alone has a revenue potential of more than Rs 10,000 crore.
The company has another project planned in Worli, on a land parcel purchased from Wadia Group promoter Nusli Wadia. It has plans to enter the plotted development space with a 71- acre parcel in Boisar on the northern reaches of Mumbai.
The company has carried out extensive launch and business development activities in Bengaluru, with its largest project in Devanahalli, near the airport. The company recently forayed into Pune, at Wellesley Road, and has also planned a project at Manjri in southeastern Pune.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Find the best of Al News in one place, specially curated for you every weekend.
Stay on top of the latest tech trends and biggest startup news.
