DLF piloting asset-backed bonds, will list them on bourses

These will be India's first commercial mortgage-backed securities, firm hopes to have them ready by December

DLF, India’s largest real estate developer, is set to pilot the country’s first commercial mortgage-backed securities (CMBS) in the next couple of weeks. The company would list it on the debt platform of stock exchanges.

“We are in the last stage of developing a CMBS product and working with credit rating agencies. We are hoping to have this product ready by the end of November or December,” said Ashok Tyagi, chief financial officer, DLF, in a conference call with analysts. “We have an annuity run rate of Rs 2,000 crore. We can raise about Rs 1,200 crore through lease rental discounting on this income. With CRMB, we can raise a higher amount.”

In the September quarter analyst presentation, the company said it was considering piloting the product for two assets and, subsequently, rolling it out on a bigger scale. “The product is being structured as a paper rated higher than the company’s overall rating, which will not only term out the liability, but also be both cash flow-efficient and save interest costs,” DLF said.

According to a recent report, infrastructure lender IDFC and city-based K Raheja Corp are also pursuing CMBS.

“We are waiting for the debt market to settle down, after the recent spike in interest rates,” Tyagi said. The company aims to record net debt of Rs 17,500 crore by the end of this financial year, irrespective of the sale of its luxury resort chain Aman Resorts. “We are working on two big (land) deals and a couple of smaller ones. So, even if the Aman deal does not happen by the fourth quarter, we are on target to achieving net debt of Rs 17,500 crore by March 2014,” said Tyagi.

DLF is talking to potential buyers to sell its hotel chain, after the chain’s founder, Adrian Zecha, with whom it had signed deals to sell the chain for $300 million, failed to meet payment deadlines.

In the September quarter, DLF’s net debt fell to Rs 19,508 crore from Rs 20,369 crore in the previous quarter.

Of the total debt repayment of Rs 6,500 crore, the company has paid Rs 3,900 crore; it has cash of about Rs 3,500 crore in hand. “There is no issue of any liquidity mismatch in servicing our debt. We are also in talks to secure credit lines of Rs 1,500 crore,” Tyagi said.

For the quarter ended September, DLF’s net profit fell 28 per cent to Rs 100 crore, against Rs 138 crore in the corresponding period last year, owing to lower sales and higher interest and tax outgo.