Cos resort to distress sales of non-core assets

Feb 15 2013, 09:25 IST
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DLF is also struggling under a massive debt burden of around Rs 21,200 crore and has sealed several deals recently in its attempt to trims its debt. (Reuters) DLF is also struggling under a massive debt burden of around Rs 21,200 crore and has sealed several deals recently in its attempt to trims its debt. (Reuters)
SummaryWhile 2012 saw 374 deals, higher than 357 in 2011, value of deals fell to $13 bn from $33 bn.

On the face of it, there may not be much similarity between the Suzlon Group, GMR Group, Lanco and real estate major DLF. However, a closer look would reveal that all of them are sitting on huge piles of debt and looking to sell stakes in either what they call non-core assets or rope in a strategic partner to reduce it. Several of them are struggling to find buyers and even in some odd cases like that of DLF, which was able to sell a land parcel in Mumbai recently the returns have not been attractive.

Similar is the case with DS Constructions, which was the concessionaire for the Delhi-Gurgaon Super Connectivity toll plaza but had to sell a 74% stake to prime lender IDFC at R1, which also took on the firmís R1,600-crore debt.

That valuations are not high and promoters are resorting to what can be termed distress sales is evident from the fact that while calendar year 2012 saw 374 inbound and domestic deals, higher than the 357 deals struck in 2011, the value of deals in 2012 fell sharply to $13 billion from $33 billion in 2011.

Take the case of GMR, which is present in airport development, power and roads. The group started selling non-core businesses in 2010 when it offloaded its stake in sugar company EID Parry for R110 crore. Today, with a total debt of nearly R37,000 crore, it is seeking to raise over R4,000 crore by selling five highway projects and also reduce stakes in some group companies, but is struggling to find buyers. The Hyderabad-based infrastructure company did, however, manage to sell its expressway project between Farukhnagar-Jadcheria to Macquarie SBI Infrastructure Investments for R206 crore on Wednesday after initially investing R146 crore in the project.

Real estate major DLF is also struggling under a massive debt burden of around Rs 21,200 crore and has sealed several deals recently in its attempt to trims its debt. But a closer look reveals a hint of desperation in sealing these deals.

In November 2012, the Delhi-based company sold a plot of land in Mumbai to its competitor Lodha Developers for R2,725 crore. On the face of it, DLF seemed to have got a good deal, having bought the land for R702 crore in 2005. But out of the money Lodha paid, R1,500 crore was to take on the debt of the project. In essence, DLF got only R1,225 crore

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