India’s largest realty firm DLF will hold a board meeting on Friday to decide on promoters’ proposed sale of 40 per cent stake in rental arm to investment firm GIC in a deal estimated at around Rs 13,000 crore. DLF had announced in October 2015 that promoters would sell their entire stake in DLF Cyber City Developers Ltd (DCCDL) that holds the bulk of commercial assets of the group. The company had in March this year entered into an exclusivity pact with Singapore’s sovereign wealth fund GIC to negotiate on this transaction. The promoters holds Compulsorily Convertible Preference Shares (CCPS) in DCCDL, which is worth 40 per cent stake in the rental arm. DLF owns the rest 60 per cent in DCCDL.
In a regulatory filing, DLF said that a meeting of the audit committee will be held on August 25 to “consider and review the status of the proposed sale of CCPS held by CCPS holders to a GIC affiliate including the key terms and conditions and make appropriate recommendations to the board”. “The board will in its meeting scheduled to be held later on August 25, 2017, consider the said recommendations and take appropriate decisions, as required,” it added. If the board approves this deal, this would be second investment from GIC into DLF group. In September 2015, GIC had invested about Rs 2,000 crore in DLF’s two housing projects in the national capital.
Last week, sources had said that both the parties — DLF promoters and GIC — could sign definitive agreement by end of this month and pegged the deal value at around Rs 12,000- 13,000 crore. The promoters — K P Singh and family — would infuse a large portion of proceeds from this proposed deal into DLF, which in turn would use this amount to cut its net debt that has reached nearly Rs 26,000 crore. In a latest analyst presentation, DLF had said that “the company and investor are in the final stages of discussion on the documentation. The transaction shall be put up to Audit Committee/Board for final approval”.
Last week, DLF’s Senior Executive Director (Finance) Saurabh Chawla had also said the proposed transactions is at the “fag end of the process”. After the agreement between the two parties, he had said GIC would approach the Competition Commission of India (CCI) for approval, while DLF will have to seek shareholders’ nod. Chawla expected the CCI approval by early November. DLF is expected to achieve a rental income of over Rs 3,000 crore in the current fiscal, of which about Rs 2,600 crore pertains to the DCCDL. The proposed deal would help DLF in making its housing business debt free.
In view of sluggish housing sales, the company is having a deficit cash flow of about Rs 750 crore per quarter. DLF is having an unsold inventory of about Rs 15,000 crore and is waiting for market revival to clear the stocks. Earlier this month, DLF reported a 58 per cent fall in consolidated net profit at Rs 109.01 crore for the quarter ended June against Rs 261.85 crore in the year-ago period. Total income rose by 9 per cent to Rs 2,211.24 crore in the first quarter of this fiscal from Rs 2,025.58 crore in the corresponding period of the previous year.