DLF promoters are actively mulling over a split of the proposed 40% stake sale in the company’s rental commercial property arm between two contenders – US private equity major Blackstone Group and Singapore’s sovereign wealth fund GIC.
Under this structure, Blackstone and GIC may pick up stakes of 20% each in the rental arm. Billionaire KP Singh and his son own 40% in the company’s rental arm, DLF Cyber City Developers while DLF holds the rest.
The promoter family is expected to fetch around Rs 12,000 cr through the proposed sale of their stake in the rental arm. However, both Blackstone and GIC are keen to acquire the entire 40% stake individually.
“While the idea is being reviewed internally, it has not been proposed to the board of directors yet,” said one of the persons mentioned above. The rental commercial property arm’s marquee assets include office buildings in Gurgaon’s prime Cyber City area and also in Chennai, Hyderabad and Kolkata where large corporate houses have set up their offices.
DLF has over 30 mln sqft of leased commercial and retail space that is expected to generate a rental income of Rs 2,700 cr in the current financial year. Of this, 26.8 mln sqft of space is housed in the company’s rental arm, and the rent attributable to this company is about Rs 2,300 cr.
The promoters are expected to infuse capital into India’s largest real estate developer, to ease DLF’s debt burden, by purchasing shares in a preferential issue with funds raised from the sale of their stake in DLF Cyber City Developers.
DLF’s net debt rose by over Rs 1,000 cr to Rs 23,530 cr during the quarter ended September.
“We have nothing further to add beyond what we have mentioned in the stock exchange releases on October, 21and the recent quarterly analysts’ presentation,” DLF said in its email response.
DLF already has a working relationship with both GIC and Blackstone’s exposure to the realty developer’s projects. In late 2015, GIC invested Rs 1,992 cr for 50% stake each in two upcoming projects in central Delhi. In the same year, Blackstone had got control of three projects in Bengaluru and Chennai as part of the realignment of shareholding in DLF’s portfolio of seven projects in South India.
With splitting the stake between both the suitors, DLF is expected to benefit on account of their experience in Real Estate Investment Trusts (REIT) market. Singapore is a thriving REIT market, and the relationship with GIC with its experience in that market will come handy for DLF when it decides to list its own REIT in India.
If Blackstone moves ahead with its REIT listing in India before DLF, it will help DLF steer its REIT plan. According to the analysts’ presentation, “two marquee investors” have submitted their offers along with detailed terms and conditions, and the bankers and legal advisors are presently engaged in evaluating them.
“At present, the transaction is running slightly behind our initial estimates. The company shall make all the efforts for an early closure but would like to indicate that there is a possibility that the closing may flow into the next fiscal year,” the presentation said.