DLF-Aman deal value may dip

Slowing economy, changing complexion of the deal may affect the sale price

With realty major DLF’s plans to sell luxury hospitality chain Aman Resorts back to its founder, Indonesian hotelier Adrian Zecha, falling through, analysts see a dip in the deal price. According to them, the slowing economy and changing complexion of the deal may impact the sale price.

DLF had struck a deal to sell the hotel chain, which it bought for $400 million in 2007, to Zecha at about $300 million (around Rs 1,800 crore at current dollar value), according to market estimates. However, Aman hotel in Delhi was excluded from the sale deal.

Even though the company had managed to convince analysts earlier about its targets of reducing debt, it may find it difficult to do it again with the first quarter results just a few weeks away.

According to a person tracking the company, DLF might have to lower the price and renegotiate the terms and conditions of the deal with new interested parties, including private-equity (PE) firms. “The company is in a hurry and this was the biggest sale in the non-core asset segment. It has to meet its debt reduction targets to sustain itself in the realty market.”

According to another realty expert, the debt targets were in line with the divestment sales and the money from Aman Resorts was expected to flow in the first quarter. “But now the company may have to revise its debt target as well if it is not able to find a new party soon.”

Barely six months after DLF announced selling off Aman Resorts to Zecha, the company is back to finding a new suitor. Although Zecha is still in the fray, DLF has started talking to others after the exclusivity period with Zecha ended in June this year. DLF has denied the deal announced in December has collapsed, adding, “Zecha is in the fray”.

 

DLF has been on a spree to divest its non-core business and was betting high on the Aman deal to cut its mounting debt at around Rs 22,000 crore.

 

Aman Resorts was up for sale for about two years before the deal was announced in December 2012. Zecha had missed two payment deadlines in February and June because of insufficient funds. Now, DLF is believed to have initiated talks with at least four buyers, including leading PE funds, after the exclusivity clause with Zecha coming to an end.

 

The company has been selling its land parcels and wind power energy business to reduce debt to about Rs 17,000 crore by the end of current financial year. It has sold non-core assets for about Rs 6,500 crore in the past two years, and its debt is down 9 per cent from the end of FY12.

 

On Thursday, the company announced the sale of 74 per cent stake in its life insurance venture DLF Pramerica Life insurance to Dewan Housing Finance for undisclosed amount. But, people close to the deal said it is estimated to be around Rs 300-350 crore.

 

“We are focused on reducing the debt by half in the next three years," executive director Saurabh Chawla had recently said.