KP Singh and family, who control the country’s top public listed realtor DLF Ltd, is planning to sell 40 per cent stake in the group’s commercial rental properties to some institutional third-party investors, according to a stock market disclosure.
The business is currently housed under DLF Cyber City Developers Ltd (DCCDL), in which debt-laden DLF Ltd owns the remaining 60 per cent stake.
The stake sale would be a big-ticket transaction given its size. DCCDL is the main profit generator for DLF and accounted for one-fifth of its consolidated assets as well as revenues for the year ended March 31, 2015. This unit churned out revenues of Rs 1,694 crore and net profit of Rs 741.9 crore last year.
Large institutional investors which have been active in the real estate sector include GIC, Blackstone, Brookfield and Goldman Sachs.
The promoters hold the stake through 159.7 million cumulative compulsorily convertible preference shares (CCPS) of Rs 100 each. These shares that represent 40 per cent stake, were due for conversion this March but were granted a one-year extension and are now due to be converted by March 18, 2016. Earlier the coupon rate of the CCPS was also cut from 9 per cent to 0.01 per cent.
DLF said its audit committee deliberated on the conflict of interest with respect to the rental business and its board would not finalise the terms of sale of the CCPS by the promoters. It will also appoint bankers besides transaction, tax and legal advisors etc for this deal.
In March 2010, DLF had merged DCCDL with promoter-owned firm Caraf Builders and Constructions that also held some rental properties besides SEZ units.
The proposed sale of stake in the unit that brings a more stable income and earnings visibility for the company, would mark another
back-to-back transaction with institutional investors.
Last month, Singapore’s sovereign fund GIC said it will invest Rs 1,990 crore across two projects of the developer located in Central Delhi.
In August, it raised over $200 million through debentures in two tranches.
Shares of DLF last traded at Rs 139.8 each, up 0.83 per cent on BSE in a strong Mumbai market on Friday.