GIC Leads Race to Buy 40% in DLF Arm for .₹ 12,000

Set to sign ex­clu­sive pacts with KP Singh and fam­ily soon to buy rental arm stake

The Economic Times - - Front Page - Arun.Ku­mar17 @times­

New Delhi: GIC of Sin­ga­pore is set to en­ter into ex­clu­sive bi­lat­eral ne­go­ti­a­tions with KP Singh and his fam­ily, the pro­mot­ers of In­dia’s largest real es­tate firm DLF Lim­ited, to ac­quire their 40% stake in DLF Cy­ber City De­vel­op­ers Lim­ited (DCCDL), the com­pany that owns a port­fo­lio of leased com­mer­cial as­sets, in­clud­ing the en­tire Cy­ber City com­plex in Gur­gaon.

The deal will help the pro­mot­ers raise about .₹ 12,000 crore, valu­ing the rental arm at nearly .₹ 40,000 crore, in­clu­sive of its .₹ 10,00011,000 crore debt, said two per­sons fa­mil­iar with the ne­go­ti­a­tions. The pro­mot­ers plan to use most of these funds in sub­scrib­ing to a .₹ 10,000-crore pref­er­en­tial is­sue of DLF Lim­ited, which in turn will use this money to re­tire a por­tion of its debt.

“The agree­ment is likely to be signed soon,” said one of the per­sons quoted above. The bal­ance 60% in DCCDL is owned by DLF Lim­ited. A DLF spokesper­son de­clined to DLF Cy­ber City De­vel­op­ers Lim­ited (DCCDL) owns a port­fo­lio of leased com­mer­cial as­sets, in­clud­ing the

Deal to value the rental arm at nearly 40,000 crore, in­clu­sive of ₹ com­ment. “We do not wish to com­ment on spec­u­la­tion. We are in our silent pe­riod as our quar­terly re­sults are sched­uled for Fe­bru­ary 14,” said the spokesper­son. GIC did not re­spond to queries. Last year, Mor­gan Stan­ley and JPMor­gan were man­dated by DLF to help mon­e­tise their stake in an ef­fort to delever­age their bal­ance sheet.

GIC, which al­ready has close re­la­tion­ship with DLF, trumped Black­stone and a con­sor­tium of sovereign wealth funds from Abu Dhabi and Qatar, added of­fi­cials in the know. Close to 15 suit­ors had ex­pressed ini­tial in­ter­ests to part­ner DLF. DCCDL op­er­ates 27 mil­lion square feet of com­mer­cial prop­erty as­sets that are al­ready leased and earn­ing rent of ₹ 2,250 crore as of March 31, 2016. It also has 20 mil­lion sq ft of fu­ture de­vel­op­ment po­ten­tial.

The pro­posed trans­ac­tion will re­duce DLF Ltd’s debt in a two-step trans­ac­tion. The pro­mot­ers will pump ₹ 10,000 crore into In­dia’s largest real es­tate de­vel­oper by pur­chas­ing shares in a pref­er­en­tial is­sue with funds raised from the sale of their stake in the com­pany’s rental unit.

In ad­di­tion, the real es­tate firm plans to raise about ₹ 3,000 crore from in­sti­tu­tional in­vestors.

From these two trans­ac­tions, the com­pany will raise about ₹ 13,000 crore, and this money will be used to re­tire a por­tion of DLF Ltd’s stand­alone debt. In ad­di­tion, DCCDL owes ₹ 11,000 crore to its lenders. As it will con­tinue to be 60% owned by DLF Ltd, its debt will re­main in the par­ent com­pany’s books.

“DLF has been run­ning op­er­a­tional cash flow deficit of ~`5-6 bil­lion (`500- 600 crore) per quar­ter due to slow­down in sales and con­tin­ued con­struc­tion spend (`6.5-7 bil­lion per quar­ter).

With sales ex­pected to re­main muted, the com­pany does not ex­pect the gap to close in com­ing quar­ters. Clo­sure of DCCDL trans­ac­tion would help close that gap," wrote an­a­lysts from Axis Se­cu­ri­ties in a re­port in De­cem­ber.

DLF shares fell 0.07%, or 10 paise, to close at ₹ 147.7 50 on the BSE on Mon­day.

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