Stake sale in DLF arm to be a close contest between GIC & Blackstone

The difference in bids is Rs 400 crore-500 crore

The race to buy 40 per cent stake in DLF's rental arm, DLF Cyber City Developers (DCCDL), could turn out be a close fight between Blackstone and GIC - two of the biggest investors in the Indian real estate market.

According to sources in the know, the difference in bid amount of Blackstone and GIC is just Rs 500 crore and the difference in cap rates is 0.2 per cent. Cap rate shows the potential rate of return on a real estate investment.

DLF's rental arm DCCDL is valued at around Rs 2,4000 crore.

"Blackstone and GIC are neck and neck in bids and are currently doing due diligence," said a senior executive at a private equity firm.

According to him, though Blackstone has quoted higher, GIC could emerge a favourite to buy the stake as it is a sovereign fund and has perpetual capital.

DLF has had a relationship with both GIC and Blackstone in the past. While DLF signed a JV with GIC for two real estate projects in NCR last year, Blackstone acquired the Merrill Lynch Asia property portfolio in the past which had a JV with DLF.

According to reports, a consortium of Kotak Realty Fund, Abu Dhabi Investment Authority and Qatar Investment Authority were also believed to be in the race.

DCCDL has office assets in National Capital Region and Kolkata.

When contacted, a DLF spokesperson said," We would not like to comment on speculation. We continue to be in discussions with a number of prospective investors.'' He added the company would inform the exchanges if there was a development in this regard.

The deal is likely to be completed by March next year.

The funds will be used by DLF to reduce its Rs 22,500-crore debt of which Cyber City's consolidated debt is Rs 12,325 crore.

Analysts expect DLF debt to come down to Rs 10,000 crore after promoter infusion in the company.

Promoters would re-invest a significant part of the amount realised from the sale in DLF.

DLF is also likely to raise Rs 2,500-3,000-crore via qualified institutional placement (QIP) to reduce its debt further.

DLF has also said it would go in for a real estate investment trust (REIT) in the current financial year. The move expected to happen after the stake sale by promoters.

A host of companies such as Raheja and Prestige are also looking to sell stake in their rental arms. Raheja is in talks with Investors such as Warburg Pincus and Temasek to sell stake.