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DLF promoters to sell 40% stake in rental arm to GIC

LiveMint logoLiveMint 01-03-2017 Madhurima Nandy

Bengaluru: Singapore sovereign fund GIC Pte. will hold exclusive talks with the promoters of DLF Ltd, India’s largest property developer, to purchase their 40% stake in a rental unit.

The stake sale in its rental unit is expected to raise about Rs12,000-13,000 crore and will significantly bring down DLF’s debt levels. The transaction, which DLF claims will be a game-changer for the firm, involves DLF promoter firms selling their entire 40% stake in DLF CyberCity Developers Ltd to institutional investors.

DLF’s audit panel on Wednesday approved the entry into the next phase of the process to negotiate definitive transaction documents, DLF said. “Once the documentation is completed and the terms and conditions are decided upon, the transaction will have to procure regulatory approvals,” said Ashok Tyagi, group chief financial officer.

The documentation of the deal is expected to be completed over the next couple of months and the money is expected to come in by the September quarter.

Blackstone Group LP and GIC were shortlisted to buy the stake in DLF’s rental portfolio.

“Once the money comes in the hands of the promoters, a substantial amount of money will come back into the company,” Tyagi said.

DLF will continue to hold its 60% stake in DLF Cyber City.

With the promoters infusing the sale proceeds into DLF and a subsequent equity raising, will help ease concerns about the company’s debt.

In the December quarter, DLF’s debt rose by Rs1,257 crore to Rs24,397 crore.

In February, the developer said it expects debt to shoot up owing to muted sales and collections that will persist for a few quarters and lead to a shortfall in operating cash flows.

In an analyst presentation, the company estimated the shortfall at around Rs750-1,000 crore per quarter.

This is the second time that DLF and GIC will partner after DLF Home Developers Ltd, a unit of DLF, and GIC entered into a joint venture to invest in two upcoming projects in central Delhi in September 2015.

GIC invested about Rs1,990 crore and DLF was to develop the projects.

DLF is expected to launch one of the two projects this year, group financial officer Tyagi said in an analyst call in February.

DLF’s fiscal third-quarter profit fell 46% to Rs98.14 crore from the year-ago period. Revenue also fell 30% to Rs2,057.92 crore during the three months ended December.

DLF has around 22 million sq. ft of under-construction projects and it expects them to be completed by September 2017. It will have to spend around Rs3,500-4,000 crore on construction to finish these projects. Its unsold inventory, at current prices, is estimated at around Rs14,000 crore.

On Wednesday, DLF shares rose 2.1% to Rs153.55 on BSE, while the exchange’s benchmark Sensex gained 0.84% to 28,984.49 points.

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