Realty major DLF Ltd is looking to raise as much as Rs 5,000 crore (or $820 million) through private placement of non-convertible debentures (NCDs) in one or more tranches to augment its long-term resources, the company disclosed in a postal ballot notice to its shareholders for their approval.
The realtor did not specify the time frame within which it plans to raise the capital.
In the notice to its shareholders it said, “…the Board of Directors to offer or invite subscription for secured/unsecured redeemable non convertible debentures including sub-ordinated debentures, bonds and other debt securities, in one or more series/tranches up to an aggregate amount of Rs 5000 crore.”
The debt laden firm has been looking at various routes to cut down its existing debt liabilities. It had been selling assets and has also experimented with mortgage-backed securities.
Recently, DLF raised roughly Rs 900 crore through commercial mortgage-backed securities of its step-down subsidiaries DLF Emporio Ltd and DLF Promenade Ltd. Under CMBS, funds available with the issuer during the tenure of the instrument are higher than lease rental-discounting loans from banks as these loans have a structure where principal repayment is amortised whereas CMBS instruments give the option of bullet repayment. Further, CMBS instruments have the benefit of fixed interest rates and usually have lower funding costs.
In the past it has sold its hospitality and wind power assets as part of divestment of non-core assets. However, those transactions have not allowed the company to make meaningful debt reduction.
The net debt of DLF increased by Rs 538 crore during the quarter ended June to Rs 19,064 crore. Its net profit fell by 29 per cent to Rs 127.77 crore for the April-June quarter of this financial year.
On the current outlook, DLF has said it would aim to "keep the net debt range bound (+/- Rs 500 crore)" through divestments of land. It will target more CMBSs (Commercial Mortgage Backed Securities) in this fiscal to improve the quality of debt.