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Image courtesy: expresstowers.in

Pune Infoport Private Limited (PIPL) is bracing to acquire 97.32% equity stake in Indian Express Newspapers (Mumbai) Limited (IENML) that owns iconic Express Towers at Nariman Point in Mumbai. 
As IENML had earlier demerged its publishing business, the proposed transaction actually means purchase of Express towers at an enterprise value of Rs 840 crore including existing debt of Rs 70 crore on the assets. 
PIPL is raising Rs 300-crore debt through private placement of non-convertible debentures (NCDs) to part finance the acquisition of IENML, which is 51% owned by Indian Express Group and 49% by ICICI Ventures. The NCDs would be refinanced as lease rental discounting loan from banks on maturity of the debentures after 18 months from the date of issue.
PIPL is special purpose vehicle in which 51% stake held by Panchshil Techpark Private Limited (PTPL), a high-profile real estate company which is majority-owned byMr. Atul Chordia and his family. The remaining 49% shares of PIPL are held by four companies belonging to Blackstone Real Estate Partners, which is a part of American private equity fund Blackstone. PIPL will manage IENML as its subsidiary.
According to PIPL, “The business of Indian Express Newspapers (Mumbai) Limited is subject to significant risks” that include securing several governmental approvals which are essential to complete the acquisition of Express towers.
PIPL has told investors that IENML“requires approvals and/or documents from various government entities at the Central and State Government level for its operations in relation to Express Towers. There is a reasonable uncertainty that Indian Express Newspapers (Mumbai) Limited will obtain these approvals, consents or enter into these documents or enter into binding documentation in a timely manner which could have a material adverse effect on Indian Express Newspapers (Mumbai) Limited’s business prospects.”
Another significant risk is that “an increase in the interest rates on the existing financial assistance availed by Indian Express Newspapers (Mumbai) Limited may increase its repayment obligations which may adversely affect its operations and cash flows.”
Yet another risk faced by PIPL is the termination of existing lease agreements and leave and license agreements with existing tenants which would affect the cash flows and operations of IENML.
Moreover, the vacant spaces in Express Towers may not be immediately leased or let out as IENML may not be able to find tenants for the vacant space immediately given the market conditions and high lease rentals to be obtained to ensure profitability.
In January 2008, Indian Express Group had decided to demerge its publishing business from IENML and induct ICICI ventures to enhance the value of Express Towers.  The publications business is currently managed by Indian Express Limited. 
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