Business Standard

DLF sells 33% of rental arm to GIC for ~11,900 crore

Deal values rental arm at ~35,617 cr ore


In one of the biggest real estate deals in the country, the board of directors of leading developer DLF has approved a 33.34 per cent stake sale in its rental arm— DLF Cyber City Developers Ltd (DCCDL)— for ~11,900 crore to an affiliate of Singapore’s GIC. The deal pegs the value of DCCDL at ~35,617 crore, the company declared in a BSE filing late on Friday evening.

In March, DLF had almost finalised a transactio­n to sell 40 per cent in the rental subsidiary for an estimated ~13,000 crore to the GIC affiliate. However, after weeks of deliberati­on leading up to a long board meeting on Friday, a decision was taken to sell a lower stake.

“The transactio­n implies an enterprise value of ~35,617 crore for DCCDL, translatin­g into an equity value of ~30,200 crore approximat­ely. Post completion of series of steps as contemplat­ed in the transactio­n, DLF shall hold 66.66 per cent equity shares, up from 60 per cent on a fully diluted basis earlier and Reco Diamond, an affiliate of GIC Real Estate, Singapore, shall hold 33.34 per cent equity shares in DCCDL,” the company said in its filing.

Promoters K P Singh and family would sell a 33.34 per cent stake in DCCDL to GIC for ~8,900 crore. The remaining shares would be bought back by DCCDL for ~3,000 crore. The promoters are expected to get net proceeds of over ~10,000 crore after tax and a substantia­l part of this amount will be invested in DLF for debt repayment.

GIC would now move the Competitio­n Commission of India (CCI) for approval while DLF would approach shareholde­rs for a go ahead. This is the second investment by Singapore’s sovereign wealth fund GIC in DLF. In September 2015, GIC had invested about ~2,000 crore in DLF’s two housing projects. According to the BSE filing, the deal includes the secondary sale of equity shares, post conversion of cumulative convertibl­e preference shares (CCPS) to Reco Diamond for ~8,900 crore and two buybacks of CCPS by DCCDL for ~3,000 crore, out of which one buyback shall be before closing and another 12 months later.

The company made it clear that the transactio­n has been structured in a way to make best use of the surplus cash in DCCDL resulting in an efficient capital structure. According to the real estate major, the transactio­n shall create one of the leading platform play for rental properties, with rent yielding assets of almost 26.9 million square feet.

“The portfolio, currently, has an under developmen­t pipeline of approximat­ely 2.5 million square feet with further developmen­t potential of approximat­ely 19 million square feet within the portfolio,” the company said. While around 25 companies were in the fray when talks began to find a prospectiv­e buyer in April 2016, the race had eventually narrowed down to GIC and American private equity firm Blackstone.

DLF has about 30 million square feet of commercial area with an annual rent of about ~2,700 crore and out of that, DCCDL holds about 22 million sq ft of commercial space.

Triggered by enforcemen­t of Real Estate Regulation Act (RERA) and later goods and services tax (GST), DLF reported a decline of 58 per cent in its consolidat­ed net profit at ~109.01 crore for the quarter ended June.

According to industry experts, the deal will give DLF a partner to expand its commercial renting business. It will also help the developer restructur­e its balance sheet and also reduce debt. The company's consolidat­ed net debt stood at ~25,898 crore at the end of June quarter. DLF will start receiving the proceeds from the stake sale in its rental arm in October once the deal concludes.

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