DLF Assets (DAL), a K P Singh-promoted company, is planning to raise $450 million (Rs 2,187 crore) from a clutch of private equity investors. However, the company is also exploring the option of raising funds through debt from domestic banks and external commercial borrowing (ECB).
Currently a debt free company, DAL owes DLF receivables to the tune of Rs 4,804 crore. DLF would ideally like the amount to be cleared by March 2009. DAL has been trying to raise funds for sometime. JP Morgan is advising it currently. Analysts think that given the current scenario, going for a PE deal rather than debt option is more desirable.
“When a company is diluting its stake to PE investors, it also dilutes its risk. So, it is safer to opt for this option. On the other hand, if a company takes the debt option, it will have to pay off an outstanding amount, which is time-bound. It will also have to pay interest for the loan,” explained a Mumbai-based analyst.
DLF also had plans of listing a REIT (Real Estate Investment Trust) in Singapore, which did not work out. DLF has already sold 20 million sq ft of commercial property to DAL. The latter will pay Rs 600 crore to DLF starting FY09. London-based Symphony Capital, which invested $450 million in DLF Assets, acquired the stake held in the entity by co-investor Lehman Brothers’ sponsored fund.
The exact amount paid for this secondary transaction stands undisclosed, but Lehman had originally invested around $200 million for picking the minority stake. Apart from Symphony Capital, DAL has also diluted its stake in De Shaw, which is a US hedge fund. This fund, with a total asset of $30 billion, has invested $400 million in the DLF group.
India saw a 45% drop in total PE deal value and a 24% decline in the total number of PE deals announced in 2008 compared to 2007. More than a third of all deals were in the real estate sector.
Another option before DLF is to explore the debt option. DAL could raise Rs 3,000 crore via lease rental discounting by March-end from Indian banksThrough the ECB route, developers can raise cheap funds from overseas for integrated townships.
Previously, realty developers were prohibited from raising funds through ECBs, as foreign funds were considered the main trigger for the rapid increase in property prices.
Money metrics
• DLF Assets (DAL) is planning to raise Rs 2,187 crore from a clutch of PE investors
• It is also exploring the option of raising funds through debt from domestic banks and ECBs