India's largest realty company DLF plans to launch the Real Estate Investment Trusts (REITs) next year to monetise its commercial properties and is looking for strategic and financial partnership with global players.
DLF is targeting to "create one or more sizeable REIT platform next year ?- one for office and the other for retail to recycle capital for further growth and spin off the RentCo attributable debt", it aid in an analyst presentation.
The company has strong a portfolio of office and retail properties from which it at present earns about Rs 2,100 crore as rental income.
DLF said the objective of launching REIT would be not only to maximise the present value of the assets but also capture the immense potential of growth that a growing Indian economy has to offer in the future.
In September, market regulator Sebi had notified norms for listing of business trust structures, REITs and InvITs ( Infrastructure Investment Trust), that would help attract more funds in a transparent manner into realty and infrastructure sectors. These trusts would get tax incentives.
As growth cycle in the office and retail segments of rental business improves, DLF said, it is reviewing all strategic options so that the company not only maintains its leadership position but also harnesses the growth that the market shall offer.
DLF is also seeking to create long-term free cash flows in the form of dividend flows as holders of REIT units and fees from the management of the same.
"To achieve the above, the company is exploring partnership with other global players, both strategic and financial partners, who may have an interest in participating with DLF in this foray. This could include en-cashing the company's part investment in RentCo business," it added.
It noted that despite turbulent times since the global financial crisis, the company created a large annuity stream of income of a business with an asset base of 27 million sq ft and expected annuity income of about Rs 2,100 crore this fiscal.
On August 10, the SEBI had cleared new norms for setting up and listing of REITs and InvITs.
The new guidelines, which herald a new investment avenue in India on the lines of one in developed markets like the US, UK, Japan, Hong Kong and Singapore, would allow trading in units of REITs and InvITs like any other security on stock exchanges.
Property consultants expect that REITs could attract USD 8-10 billion worth funds.
Tyagi clarified that another proceeding by Sebi against the company is not a new case but is related to the same case where the regulator had passed the order barring DLF from accessing the capital market.
"This is not a new case. It is the same case," he said.
Yesterday, DLF said SEBI had "issued a (SCN) show-cause notice dated August 28, 2013 under Sections 15HA and 15HB of the SEBI Act, 1992 and under Rule 4 of the SEBI (procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995, hearing on which has been completed and the company has filed its written synopsis/submissions"
"The order from SEBI on the said notice is awaited," it had added.
Asked about the conversion of Compulsorily Convertible Preference Shares (CCPS) held by its promoters as the deadline for same is March 2015, DLF CFO Tyagi said: "There is still 4 months time. Let's see"
Chawla said that these CCPS can be converted into equity.
Post conversion of CCPS into equity shares, DLF promoters will have 40 per cent economic interest in DLF's commercial arm DLF Cyber City Developers Ltd.
In late 2009, DLF had announced merger of its subsidiary DLF Cyber City Developers with promoters firm Caraf Builders & Constructions, the holding company of DLF Assets Pvt Ltd.
It had also said that post merger, DLF would have 60 per cent stake in DLF Cyber City and the residual 40 per cent economic interest would be held by the shareholders of Caraf.
DLF Cyber City Developers had then issued CCPS worth Rs 1,597 crore to the promoters.
Meanwhile, DLF expects to achieve sales booking guidance of Rs 3,500-4,000 crore for this fiscal on the back of three new launches of projects in Delhi and Gurgaon markets.
However, the company said it would be difficult to meet targets in volume terms.
Tyagi also told analysts that the company would continue with strategy to divest non-core land parcels in Hyderabad, Goa and also few in north India. It would also look to raise funds through private equity at project level.