Oberoi Realty To Seek Shareholder Nod For Related-Party Deal Worth Up To Rs 4,000 Crore

Oberoi Realty Ltd. will seek shareholders' approval to acquire one or more residential premises in its Mumbai's Ritz-Carlton project from a related party.

The company proposes to acquire units in ‘Three Sixty West’ from Oasis Realty for up to Rs 4,000 crore, according to its exchange filing. The related-party transaction will be put to vote through an extraordinary general meeting on Dec. 1

Three Sixty West is a mixed-use development located in Worli, Mumbai and comprises two towers. One will house The Ritz-Carlton Hotel and the other will have luxury residences managed by The Ritz-Carlton.

"We await clarity on why purchase (part or full) partner’s share of unsold units in a completed project versus utilizing monies for buying greenfield projects, especially when a project has been running since FY10 and offers slow selling high value units," Axis Capital said in a Nov. 9 note.

The transaction, it said, may have been proposed for better realisations and possible quicker timelines of sales that would help with adjustment of already advanced monies/refundable deposits along with up to 12-month time to pay such monies among other reasons.

There are several possible benefits to the realty company that includes lower tax rate in a private company compared to its current holding structure—Associations of Persons, the note said.

"Purchase price of the units will act as the cost price, thus a lower tax rate on possible lower margins (versus existing high margins)," it said.

The purchasers might get stamp duty benefits for repurchase of units, as the government allows stamp duty adjustment for resale within three years, it said.

However, Axis Capital said that it seeks more clarity on the means to fund the proposed transaction and the extent of taxes to be levied on it.

Oberoi Realty's second quarter revenue fell 8.6% to Rs 689 crore, and its net profit increased 19% to Rs 319 crore.