DLF eyes multiple partners for stake sale in rental arm

| Updated on: Sep 29, 2016

This move may lower its ₹22,120 cr debt

Real estate company DLF is eyeing multiple partners to divest 40 per cent stake in its rental arm -- DLF Cyber City Developers -- in order to get maximum valuation.

“The company is holding individual bilateral discussions with more than three financial institutions at the moment,” a source in the know of the development told BusinessLine .

According to reports, DLF had shortlisted Brookfield Asset Management, Blackstone Group and Singapore wealth fund GIC for this exercise.

Markets regulator Securities and Exchange Board of India (SEBI) has relaxed rules and a company can have multiple firms coming in... to create competition, the source said, adding that “DLF will not divest stake to just one partner.”

The debt-laden company is looking to close the transaction before the end of this financial year.

The stake sale is expected to leave DLF in funds, enabling it to substantially lower its debt which stood at ₹22,120 crore as on June 30. The company had announced plans to dilute stake in the rental arm in October last year.

“It makes sense for DLF to bring in more partners as it will achieve the objective of getting maximum valuation. They may even divest the 40 per cent stake to two-three players at differential rates. It is also possible that they ask other firms to match the highest bid received,” an analyst told BusinessLine .

Apart from Brookfield, Blackstone and GIC, other firms such as Qatar Investment Authority and Warburg Pincus are still in the race, an industry insider said.

According to estimates, the 40 per cent stake sale could fetch DLF up to ₹14,000 crore.

The stake sale is expected to be followed by raising more equity shares worth ₹3,000 crore to make up for the funds lost due to taxes, the source said, adding that DLF will also look at launching a REIT after this exercise. “DLF’s debt could come down to ₹6,000 crore after this and could be debt-free in two years,” the source said.

The culmination of the transaction will be an important step to create two ‘pure plays’ — a residential business with zero debt and an independent commercial business in partnership of long term institutional investors.

The Information Memorandum was circulated among the investors in April and multiple bids were received from sovereign funds and global private-equity firms in June.

DLF, in its analyst presentation after the announcement of financial results for first quarter of financial year 2016-17, had said that it had allowed shortlisted bidders access to virtual data room and vendor diligence reports.

The company had added that it expects to receive binding, updated bids in the form of marked up shareholder agreements once the shortlisted bidders complete their due diligence.

Published on January 16, 2018

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