Singhs sell 10% in DLF to prop up group firm

Written by Corporate Bureau | New Delhi | Updated: May 14 2009, 06:15am hrs
The KP Singh family, promoters of DLF Ltd, on Wednesday sold a 9.9% stake in the company to raise about Rs 3,860 crore. The proceeds will be routed to DLF Assets Ltd (DAL), also promoted by the Singh family. DAL will use the money to meet its contractual obligations to DLF, to which it owes about Rs 5,000 crore, and for buying out DE Shaws stake in DAL.

The sale of 16.8 crore DLF shares took place just above Rs 230 apiece, 2.6% below Tuesdays closing price and far lower than DLFs IPO price of Rs 525 a share.

The news pushed up the DLF share to a high of Rs 254 on the Bombay Stock Exchange on Wednesday, though it retreated later on profit booking, and closed down 1.59% at Rs 232.50.

DLF said the transactions, executed by Deutsche Bank and J P Morgan, generated strong response from most of the large existing institutional shareholders as well as several high quality new accounts.

The quality of the company, use of proceeds and attractiveness of the sector helped the deal to sail through, Sanjay Sharma, head of equity capital markets at Deutsche Bank, who was overseeing the deal, said.

Wednesdays stake sale brought down the promoters holding in DLF, Indias largest realtor, to 78.6%.

A DLF statement said the promoters plan to use the net proceeds to infuse capital into DAL by subscribing to an appropriate instrument, or otherwise. DAL would use the infused capital to meet its contractual obligations towards DLF and its subsidiaries, the statement said.

The Singh family had floated DAL to acquire commercial properties of DLF. The Singhs had plans to list DAL in Singapore, but had to shelve the proposal because of the global financial crisis. DAL has been trying unsuccessfully to raise money through private equity funds to pay the Rs 5,000 crore it owes to DLF against the purchase of assets. Besides, one of its investors, D E Shaw, which invested $400 million in DAL in 2007, wants to exit the company.

DLF posted a 93% drop in its net profit for the quarter ended March 31, 2009, at Rs 159.05 crore.

FIIs lap up shares

The DLF stake sale saw record net equity investment by foreign institutional investors. On Wednesday, FIIs bought shares worth Rs 4,106.96 crore, according to provisional stock exchange figures. In the bulk deal executed on BSE, FIIs like Deutsche Securities Mauritius, Euro Pacific Growth Fund, Copthall Mauritius Investment Ltd and Capital Research Management together bought 91 million shares for Rs 2,100 crore.