DLF Defers Deadline for Sale of Promoters’ 40% in Cyber City
Sale transaction likely by March ’18; move to help promoters continue negotiations with shortlisted investors
Mumbai: Realty developer DLF has decided to extend the deadline for sale of 40% stake owned by its promoters in its rental arm DLF Cyber City Developers (DCCDL) to March 2018.
Separately, the developer reported a 46% year-on-year drop in its net profit at ₹ 98.1 crore for the quarter ended December. Income from operations declined 30% to ₹ 2,058 crore compared to ₹ 2,949.5 crore a year ago, the company said in its regulatory filing.
“Since the conclusion of CCPS (compulsorily convertible preference shares) sale transaction may not consummate by March 18, 2017 which being the last date of conversion of CCPS, the CCPS Holders have conveyed to DCCDL and the company that they are agreeable for extension in conversion of CCPS for one more year i.e., until March 18, 2018 at the existing dividend rate (coupon rate) of 0.01% per annum,” DLF told the Bombay Stock Exchange in a regulatory filing. “Accordingly, the board based on the recommendations of the Audit Committee, accorded its consent for the said extension being the 100% equity shareholder of DCCDL.”
In the current market scenario, with easing interest rates and falling capitalisation rates, commercial properties are expected to fetch higher valuations. DLF’s promoters may have kept this view while requesting for extension in conversion of their compulsorily convertible preference shares to March 2018.
According to DLF, the discussion with shortlisted investors is at an advanced stage in respect of DCCDL’s CCPS transaction and will be presented to Committee of Independent Directors for its evaluation and final decision. “In lieu of this, conversion period for CCPS issued to the promoters in DCCDL has been extended by one year at their request to facilitate its sale,” DLF said.
DEC QUARTER EARNINGS
In October 2015, DLF had for the first time said that its promoters would sell their 40% stake in the company’s rental arm DLF Cyber City Developers (DCCDL) for an estimated amount of ₹ 12,000-14,000 crore. Of this, they would reinvest a substantial sum back into the company after paying tax and other charges and this was aimed at reducing the developer’s debt burden. DLF’s net debt stood at ₹ 23,530 crore as of September end.
However, in February 2016, in the backdrop of market conditions, the company extended the deadline by deferring conversion of the CCPS until March 18, 2017 on the same terms and conditions.
DCCDL operates 26.8 million sq ft commercial properties that are already leased and earning rent of around ₹ 2,300 crore as of September 2016. It also has significant future development potential.
The developer’s finance cost during the December quarter rose 13% to ₹ 758.6 crore against ₹ 670.6crore a year ago. Total expenses of the company declined 35% to ₹ 1,242.13 crore during the quarter from ₹ 1,911.64 crore a year ago.
According to the company, the performance in the last quarter was subdued, as the market adjusted itself to new paradigm initiated by the demonetisation move. While demonetisation has been extremely positive for the company and the industry, it has had short-term negative impact on secondary sales, which in turn has impacted primary offtake. The company expects this period of adjustment may continue for the next few quarters till the time the secondary market stabilises and customers start to purchase new products. In the interim, the company continues to remain focused on execution and creation of finished inventory. With record deliveries of 11 million sq ft in the first nine months of the fiscal, the residential projects under construction have come down to 19 million sq ft, DLF said in its earnings release.
DLF said that its office-leasing business continues to witness healthy traction, backed by expansion in the services sector. The leasing rates exhibited growth in line with company’s projections. Witnessing the demand in office leasing, the company is building out two new office complexes – Gurgaon and Chennai. Retail sales at the malls, where the company enjoys revenue share, did witness some temporary fallback. Almost all of the retailers, with the exception of few, are now experiencing normal sales momentum, the release added.