MFs plan to oppose Embassy REIT's proposal to raise ₹3,000 crore

livemint.com:

₹3,000 crore to acquire a business park in Chennai with an enterprise value of ₹1,269 crore on Monday. The grounds for opposition are that the proposed fund raise will be higher than the acquisition cost and on concerns that units could be issued below the REIT's net asset value and market price, according to a person aware of the matter.

ICICI Prudential Mutual Fund, HDFC Mutual Fund and Kotak Real Estate Fund, which jointly hold 17.29% in the REIT as per Bloomberg, would vote against a resolution “to consider and approve raising of funds through an institutional placement(s) of units of Embassy REIT not exceeding ₹3,000 crore to investors in one or more placements at a unitholders' meeting on Monday," said the person, speaking on condition of anonymity. While the resolution for acquisition will be passed by simple majority—votes cast in favour should be more than votes cast against—that for the fund raise will be passed by special majority—votes cast in favour need to be not less than one and a half times votes cast against the resolution, as per Sebi regulations for REITS.

The fund raise is to acquire the rights, title and interests of a wholly-owned subsidiary of Embassy Property Builders and Developers in Embassy Splendid TechZone for ₹1,269 crore. The person cited earlier said that the mutual funds are primarily concerned about the fund-raise proposal being higher than the price of the property, and fear that units could be issued below their market price and net asset value.

While the market price of Embassy Office Parks REIT was ₹362.02 per unit on the National Stock Exchange (NSE) as of Friday, the NAV per unit (948 million units) was ₹401.59 as of the end of March. “We have discussed this issue multiple times