Debt-ridden DLF on turnaround route?

turnaround

Reflecting signs of a possible turnaround, India’s most valuable realty estate developer DLF Ltd is reportedly planning to sell its stake in two residential projects and monetise its portfolio of rental assets in a bid to raise nearly Rs 10,000 crore.

The company has been hit by a huge debt and slowing demand in the real estate sector for the past few years. DLF’s net debt stood at Rs 21,598 crore in the quarter ended 30 June.

The company said on Wednesday that its subsidiary DLF Home Developers Ltd would raise Rs 1,990 crore from Government of Singapore Investment Corp Pte Ltd (GIC). The funds raised from the GIC will be utilised to cover operational costs and trim debt, the Livemint reported.

“The GIC deal shows that we can also bring in investor partners for our rental portfolio in the future. If we dilute even 40-50% stake in our rental assets, it will help bring down the debt of our development portfolio by about 60-70%,” said Saurabh Chawla, senior executive director, finance, at DLF.

Share prices of DLF rose over 13% in the past two trading sessions on the Bombay Stock Exchange (BSE). On Thursday, stock price of DLF rose more than 10% to close at Rs 120.65.

DLF also said that its shareholders had given nod for a proposal made by the company to pledge over 50% of its shares in three of its units “to raise as much as Rs 7,500 crore and create third-party rights”.

DLF now aims to establish a private rent company with third party shareholders, which will allow its promoters to exit and bring in private equity (PE) investors. The company plans to raise “both debt and equity” against its profitable rental portfolio.

Chawla said that DLF had already raised a significant part of Rs 3,000 crore it planned to raise from PE funds.

Besides, DLF agreed to sell its non-core cinema exhibition subsidiary DT Cinema to multiplex chain PVR Ltd for Rs 500 crore to increase cash flows and lessen the debt burden.

“Will these help in realizing the full potential of the company and help it grow? We are not so sure,” said a Mumbai-based brokerage firm, requesting anonymity.

“DLF has been bogged down by negative cash flows for a long time now and close to Rs 700 crore of quarterly interest payments. If it manages to bring down debt and the cost of borrowings, it will allow the company to breathe, but in the long term, actual sales need to happen for it to generate positive cash flows,” said Sandipan Pal, analyst at brokerage Motilal Oswal Securities Ltd.

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