DLF's rental arm stake sale by Sep, may fetch Rs 12,000 crore

Three global institutional investors - Blackstone, GIC and Abu Dhabi Investment Authority - have been shortlisted as buyers in DCCDL

Realty major DLF's promoters are likely to sell 40 per cent stake in its rental arm by September, a deal estimated to fetch around Rs 12,000 crore.

According to sources, three global institutional investors – Blackstone, GIC and Abu Dhabi Investment Authority – have been shortlisted as buyers in DLF Cyber City Developers Ltd (DCCDL). Due diligence process is on and the agreement is likely to be signed by September.

DLF's billionaire promoter K P Singh and his family will reinvest a significant part of the amount realised from the sale into DLF Ltd.

The realty major in October had announced that its promoters will sell 40 per cent stake in DCCDL, which holds the bulk of office and retail complexes. DLF would, however, continue to own the remaining 60 per cent stake in DCCDL.

In April, DLF's bankers had circulated the information memorandum to 18-20 global institutional investors that are keen to purchase this stake.

As per the memorandum, DCCDL has about 25-26 million sq ft of leased commercial space with an annual rental income of about Rs 2,250 crore. DCCDL also has 20 million sq ft of future development potential.

Of the DLF's total net debt of Rs 22,202 crore, DCCDL's share was at Rs 12,325 crore in the last financial year.

"With this proposed transaction, DLF will be able to achieve three of its main objectives, removal of conflict of interest, creation of a rental platform with large financial investors and reducing substantial portion of debt," DLF's Senior Executive Director, Finance, Saurabh Chawla had said in October.

While announcing the annual result in May, DLF had said the intent of the transaction is to create a platform in partnership with long term institutional investors to own and develop commercial assets.

"Grow the commercial business, organically and inorganically, and target high equity returns for the shareholders; it shall be a precursor to setting up of REITs (Real Estate Investment Trust) in the medium term," DLF had said in a presentation.

The deal will be an important step to "create two pure plays - residential business with zero debt and an independent commercial business".

Singapore's sovereign wealth fund GIC had invested Rs 1,992 crore last year to acquire 50 per cent stake in two of DLF's new projects in Delhi.

Recently, DLF restructured its joint venture with Blackstone-managed Ridgewood Holdings that had invested Rs 1,481 crore in seven housing projects in 2007.

The partners had divided five undeveloped land parcels of about 500 acres in Bengaluru and Chennai.

DLF has a land bank of 281 million sq ft, of which 37 million sq ft is under construction. The company had posted a net profit of Rs 549.39 crore over a turnover of Rs 9,259.86 crore in the last fiscal.