DLF to save Rs 175 cr a year as promoters cuts CCPS coupon rate

Promoters slashed the coupon rate from 9% to 0.01%

DLF will save about Rs 175 crore annually after promoters decided to slash coupon rate on securities held by them in realty major's subsidiary from 9% to 0.01%, a senior company official said.

Last week, DLF promoters deferred till March 2016 conversion of the compulsorily convertible preference shares held in DLF's arm DLF Cyber City Developers Ltd. Promoters also slashed the coupon rate from 9% to 0.01%.

"The annual savings due to reduction in CCPS coupon rate from 9% to 0.01% will be approximately Rs 175 crore," DLF Chief Financial Officer Ashok Tyagi told PTI.

In late 2009, DLF had announced merger of its subsidiary DLF Cyber City Developers with promoter firm Caraf Builders & Constructions, the holding company of DLF Assets.

DLF Cyber City Developers had then issued compulsorily convertible preference shares worth Rs 1,597 crore to DLF promoters.

Post-conversion of compulsorily convertible preference shares into ordinary shares, promoters would have 40% stake in DLF Cyber City Developers, which holds bulk of the DLF's commercial assets. DLF has about 30 million square feet of commercial area with an annual rent of over Rs 2,000 crore.

The deadline to convert these conversion of the compulsorily convertible preference shares into shares was March 19 this year, but the same could not be executed in view of SEBI's order in October 2014 banning DLF and six executives from capital market for the next three years.

The SEBI order was quashed last week by the Securities Appellate Tribunal (SAT).

Tyagi said that the promoters decided to defer the CCPS conversion as only few days were left to meet the March 18 deadline.

He said the future course of action on the compulsorily convertible preference shares conversion would be decided after the recommendation of the audit committee set up by the DLF to suggest growth of its rental business RentCo.

In August last year, DLF had said that the Audit Committee chaired by KN Memani would evaluate, review and recommend various strategic options to drive sustainable and long-term growth and development to the rental business.

The audit committee was also asked to create the optimum structure for rental business in order to improve efficiency and control and to reduce conflicts of interest, if any, inter-se affiliated persons/entities in keeping with best corporate governance practices.

DLF, the country's largest realty firm, has recently announced that it will launch two Real Estate Investment Trusts (REITs) to monetise its rent-yielding commercial -- office and retail -- buildings.

The company has a land bank of about 295 million sq ft, of which 50 million sq ft is under development.