DLF-GIC deal delay has the Street worried

WHY DLF DEAL TILTED TOWARDS GIC

The DLF stock fell 8.11 per cent on the BSE on Thursday a day after it announced its promoters would sign with Singapore’s GIC Pte the much-awaited deal to sell their entire 40 per cent stake in DLF Cyber City Developers. While profit-booking can be partly attributed to the fall in the stock, market experts say lack of clarity on the deal valuations as well as the deal closure getting postponed to September 2017 quarter are other reasons.

Singaporean sovereign fund GIC and US-based private equity giant Blackstone were neckand-neck for acquiring DLF promoters’ 40 per cent stake in their rental arm DLF Cybercity Developers (DCCDL). The realty major on Wednesday said it has entered into a exclusive agreement with GIC to sell the stake. DLF, however, did not announce the value of the deal, which is expected to be to the tune of ~12,000 crore.

Bid amount not withstanding, several factors tilted the scale in favour of GIC, say a top company executive and analysts.

“GIC has the experience of having Reits (real estate investment trusts) in Singapore,” said DLF chief executive Rajeev Talwar, hinting that having GIC as a partner will help the company when it floats a Reit in the country or Singapore in the future. DLF has already said it has plans to float a Reit in the near future.

“Both of them said the entire 40 per cent should be sold and not in tranches. We had to decide one investor,” he said.

Talwar agreed the fact that GIC being a sovereign fund and has perpetual capital also helped the matter in its favour. In comparison, American private equity giant Blackstone has fixedtenure funds.

A private equity (PE) fund manager, who did not want to be quoted, said the fact that the Government of Singapore is already a investor in the company must have also helped the Singaporean investor clinch the deal.

The Government of Singapore owns 3.8 per cent in DLF.

A e-mail sent to GIC in Singapore did not elicit any response.

According to the PE executive, since Blackstone recently bought stake in K Raheja Corp rental arm, and it also has joint ventures with Bengaluru-based Embassy and Pune-based Panchshil, it could have conflict of interest as DLF competes with these players in some of the markets.