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October 07, 2006

Restructuring in real estate

Economic Times has an article on how real estate firms as well as companies with real estate holdings are busy restructuring.
The Ashok Piramal group-promoted Peninsula Land is merging its subsidiary Dawn Mills Company in a move aimed at consolidating the group’s real estate businesses under a single entity. While the Ajmeera group-promoted Shree Precoated Steel is in the process of restructuring, which will see the merger of its real estate business with the steel firm, Anant Raj Industries has decided to amalgamate its four subsidiaries with itself.

Kolkota-based RDB Industries plans to demerge its real estate business into a separate company — RDB Infrastructure, and merging its three real-estate subsidiaries into the demerged entity. Lok Housing and Constructions is in the process of consolidating its operations by merging its three group companies.

The rationale behind de-mergers is the creation of several focused entities varies from case to case. “For instance, a diversified company may find a business dragging its profitability or cash flows and decide to demerge it,” said an analyst with ICICI Securities. Sometimes corporates do not get the valuation it deserves which will force them to merge the group companies with themselves, to create value.

Arun Natarajan is the Founder of Venture Intelligence, which tracks private equity and venture capital in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.