The deal will help DLF to lighten its debt burden.
The DLF-GIC deal, which involves a substantial stake sale by the promoters to Singapore’s sovereign wealth fund GIC, is set to resolve the issue of conflict of interest says Saurabh Chawla, Senior ED Finance, DLF. In conversation with CNBC TV18, he said, “The conflict of interest which many capital market investors believe, exists will get removed.” Calling the deal ’game-changer’ for DLF, Saurabh Chawla says that this creates a relationship with a very long-term player such as GIC. He believes that as GIC is a sovereign entity, it will not exit the deal in the near term. In the same conversation, he said,”It’s a game changer as DLF is now accessing a player with hundreds of billions of dollars across the world, especially in the real estate asset class.”
Last week, DLF promoters — K P Singh and family — decided to sell their entire 40 per cent stake in the DLF Cyber City Developers Ltd for Rs 11,900 crore and will infuse the net proceeds into the DLF for debt repayment. This deal, the biggest in the country’s realty space, included sale of 33.34 per cent stake to Singapore’s sovereign wealth fund GIC for Rs 8,900 crore and a buyback of remaining shares worth Rs 3,000 crore by DCCDL.
The deal will also help DLF to lighten its debt burden. In the same conversation, Saurabh Chawla said,” DLF will be able to delever its balance sheet. The development sales is soft and the development overhang continues to be there in the development side of the business. So, the capital that comes in by the promoters as well as the outside investors, will help to delever the balance sheet on the development side and create free cash within the next fiscal year itself.”
Post this deal, DLF will have 66.66 per cent stake in the DCCDL and GIC 33.34 per cent stake in the joint venture. “Gross proceeds to the promoters from the transaction would be Rs 11,900 crore. The net proceeds to the promoters are estimated to be in excess of Rs 10,000 crore post applicable taxes,” DLF said in an analyst presentation.