Realty major DLF has appointed JP Morgan and Morgan Stanley as merchant bankers for proposed sale of promoters’ 40 per cent stake in the company’s rental arm DLF Cyber City Developers to institutional investors.
The company has also roped in Pricewaterhouse Coopers as tax consultant and Shardul Amarchand Mangaldas as law firm to help execute this deal, which is estimated to be valued at around Rs 12,000 crore, sources said.
Earlier this month, the company’s board had decided that DLF promoters – KP Singh family – will sell their 40 per cent stake in the company’s rental arm DLF Cyber City Developers Ltd (DCCDL).
DLF, the country’s largest realty firm, will continue to hold 60 per cent equity interest in DCCDL. The company was authorised to appoint bankers, transaction advisors, tax and legal advisors etc to assist in the proposed transaction.
Promoters will re-invest a significant part of the amount realised from the proposed sale in DLF Ltd, which in turn would utilise this fund to trim its debt that stood at more than Rs 21,000 crore as on June 30.
The promoters stake in DLF, which stands at 75 per cent, could increase post this investment and the same would have to be brought down as per the SEBI norms on minimum public shareholdings, sources had said.
In late 2009, DLF had announced merger of its subsidiary DCCDL with promoters’ firm Caraf Builders and Constructions.
DCCDL had then issued CCPS (compulsorily convertible preference shares) worth Rs 1,597 crore to promoters. Post conversion, promoters would have 40 per cent stake in DCCDL, which holds bulk of the DLF s commercial assets.
DLF had set up a committee to suggest ways for driving the growth of rental business and resolving this CCSP issue.
The company is expected to earn an annual rental income of Rs 2,400 crore this fiscal by leasing its commercial properties, including office and shopping malls comprising 30 million sq ft of area. Of this, Rs 2,200 crore rental income pertains to DCCDL, sources said.
“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 Senior Executive Director Finance Saurav Chawla had said.
With property market facing huge slowdown from last 2-3 years, DLF has been selling its non-core assets to boost its cash flow and reduce debt.
The company has exited from hotel, insurance, wind power and cinema businesses besides selling non-core land parcels.
It has raised more than Rs 10,000 crore through this process.
Recently, the company sold about 50 per cent stake in its housing project at central Delhi for about Rs 2,000 crore.