The Hindu Business Line : DLF to raise over Rs 2,000 cr thru ‘non-strategic’ assets sale

New Delhi, Feb. 2 India’s largest real estate company DLF Ltd on Monday said it plans to raise over Rs 2,000 crore by ‘unlocking’ non-strategic and non-core assets. These may include surplus land in specific sites and its wind power business.

It also plans to replace Rs 4,000 crore of short-term debt with long-term borrowing. DLF, which reported a 69 per cent drop in net profit in the just-concluded quarter amid a “virtual shutdown” in the realty market, also expects property prices to drop by another 15 per cent in the next three months.

“The suddenness of the virtual shutdown in the property market in September and October was unanticipated. Depending from product to product, we are currently down to 10-25 per cent of the normal volumes…We are hopeful that limited buying will start soon and the business will be in a reasonable shape by end of the year,” the DLF Vice-Chairman, Mr Rajiv Singh, said.

Last week, DLF Ltd posted a nearly 69 per cent fall in net profit for the third quarter ended December 2008, at Rs 671 crore.

Its consolidated revenue dropped 59 per cent to Rs 1,503 crore for the just-concluded quarter.

In a presentation to analysts, the company said adverse credit conditions and depressed market sentiments had eroded demand. It attributed the steep fall in revenue to a sharp drop in incremental sales during November and December 2008 and marginal cancellations of pre-leases coupled with insignificant leasing volumes.

For the third quarter, sales to DLF Assets Ltd — a company promoted by the DLF Chairman, Mr K.P. Singh — stood at Rs 655 crore; while the PBT contribution at Rs 258 crore represented 35 per cent of DLF’s gross profit. The Delhi-headquartered developer has in the past sold a large portion of its commercial assets to DAL.

“The total area planned to be delivered by March 2009 is 9.5 million sq ft. For closure of the entire 9.5 msf receivable, PE investment in DAL is at an advanced stage. However, given the softness in demand for leased office space, the balance delivery in DAL will be substantially delayed.

Accordingly, revenue accruing to DLF from sale to DAL will not be significant at least for the next several quarters,” the investor presentation said.

Mr Singh said DLF Assets Ltd will go for a private placement to raise up to Rs 2,500 crore (via convertible preference shares), by March-end; it may also go for a listing later this year.

Elaborating on DLF’s strategy to substitute short-term debt with asset-backed long-term debt, Mr Singh said of the overall net Rs 13,000 crore debt, about Rs 4,000 crore is short-term debt with maturity in mid-2009 to late 2009. “We will be replacing it with long-term debt. In six-eight months we will have no short-term debt on our books,” he said. The company is borrowing at an average interest rate of 12 per cent, he added.

DLF would also raise Rs 2,000 crore in additional long-term loans during the current quarter to March 31, 2009; it raised Rs 1,000 crore debt in the quarter ended December 31, 2008.

The company may also sell some of its non-strategic assets to raise funds, Mr Singh said, but did not list out such assets. Asked what the ‘non-strategic’ assets would be, Mr Singh said, these would not be malls and shopping centres but could be excess land for projects where it is open to partnerships and even a sale. “If we have any strategic option available, if a buyer comes in and wants a joint venture, or even a sale we can consider that on areas that are not strategic for us,” he said.

On DLF’s ambitious Rs 60,000 crore township project at Bidadi in Karnataka, in partnership with Dubai-based Limitless Holding, he said there was “no clarity” on the status of the project.

Giving an update on its hotel venture, DLF, in its presentation said under prevalent market conditions “all projects stand suspended till project finance is arranged for select projects”. However, it said the Hilton joint venture continues on firm footing. “The first hotel under the alliance, the Hilton Garden Inn Saket, Delhi, which is delayed due to certain regulatory approvals, is now expected to open in the first quarter of FY10. Also, DLF Hotels is a strategic investor in Aman Resorts Group. The Aman Lodhi property in New Delhi is expected to open in the first quarter of FY10,” it added.

Related Stories:
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DLF fixes buyback price at Rs 600/share maximum
DLF repays loans of about Rs 1,000 cr

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