DLF Plans to Raise Rs 100 Billion from Selling Businesses and Land

May 15, 2009	(Be the first to rate this story!)  Loading ...
Print This Story   Email This Story Subscribe Newsletter

DLF Ltd., India’s biggest real estate developer, plans to raise about 100 billion rupees ($2 billion) over two to three years from selling businesses and land, Chief Financial Officer Ramesh Sanka said. Chairman K.P. Singh and his family, founders of the developer, aim to sell shares in DLF Assets Pvt. in an initial public offering over the next 18 months to 24 months, Sanka said by telephone today. He declined to provide additional details about the fund raising. DLF Assets leases commercial properties bought from DLF to clients, and is owned by Singh’s family. The founders, who aim to halve DLF’s debt to about 70 billion rupees by March 31, are reviving IPO plans after the developer’s shares rebounded 80 percent in two months on investor optimism that a drop in borrowing costs may revive demand for properties. The developer has been forced to delay or exit projects, cut prices, and renegotiate bank debt after its stock lost three-quarters of its value last year. “Liquidity is easy at the point of time, but we live in a dynamic world,” said Jayesh Shroff, who helps manage $5 billion at SBI Asset Management Co. in Mumbai. “It’s a good idea for any company to reduce debt.”

Shares of DLF rose 6.5 percent to 250.1 rupees at the close of Mumbai trading. The stock, which fell 74 percent last year, has rallied 80 percent since March 9 on optimism that falling borrowing costs and a decline in prices will entice buyers. Investment funds controlled by Vice Chairman Rajiv Singh’s family yesterday sold a 9.9 percent stake in New Delhi-based DLF for 38.6 billion rupees. The founding family plans to use about 20 billion rupees of those funds to buy hedge fund manager D.E. Shaw & Co.’s stake in DLF Assets, and the remaining to pay the company’s debt to DLF, Sanka said. DLF Assets, known as DAL, owes DLF about 49 billion rupees, Saurabh Kumar, an analyst at JPMorgan Chase & Co. in Mumbai, said in a note to clients on May 4. Singh’s family has been trying to sell a stake in DAL for more than a year. The closely held company, which got a $400 million infusion from D.E. Shaw and $200 million from Lehman Brothers Holdings Inc. in 2007, planned to raise $2 billion from a stake sale, Rajiv Singh said in March 2008. DAL’s stakeholders said on April 30 that they were considering infusing cash into the business after the sale missed a March 31 target.

DLF will review and propose a change in its relationship with DAL by the end of the current quarter after the publicly traded company didn’t complete a scheduled delivery of properties as tenants canceled leasing commitments, DLF said in a statement on April 30, without elaborating. DLF may buy a stake in DAL, JPMorgan’s Kumar said. New Delhi-based DLF reported fourth-quarter profit fell 93 percent to 1.59 billion rupees, from 21.8 billion rupees a year earlier, as revenue generated from selling commercial properties to DAL fell 83 percent to 3.22 billion rupees from 18.5 billion rupees. The developer expects to raise 55 billion rupees from the sale of assets and 20 billion rupees from DAL this year, it said last month. The company also plans to sell its wind power unit and exit two large township projects.

DLF had 139.6 billion rupees in net debt as of March 31. About 35.9 billion rupees in debt payments due in the year that started April 1, including 14.2 billion rupees that are to be repaid in the current quarter, will be met with new long-term loans and other arrangements, according to a presentation made to analysts on May 2. “Of the 100 billion rupees they want to raise, there’s clear visibility for 21 billion rupees,” said Anubhav Gupta, an analyst with Kim Eng Securities India Pvt. in Mumbai, who rates the stock as a “sell.” “It remains uncertain how they are going to raise the remaining amount.” The developer may raise the 100 billion rupees through the sale of treasury investments, land and real estate projects, the Economic Times earlier reported, citing Vice Chairman Singh. The IPO plans were earlier reported by the Business Standard newspaper today. After yesterday’s sale, the founders’ holding in DLF fell to 78.6 percent from 88.6 percent.

News Published Under:   Delhi, Real Estate Developers |

Comments