Singapore’s sovereign wealth fund GIC has forged a joint venture (JV) with DLF Home Developers Ltd (DHDL), a wholly-owned subsidiary of DLF Ltd (DLF), to invest Rs 1,990 crore ($300 million) across two projects of the developer, the company said in a statement.
These two projects are located in Central Delhi, making it a rare large development in the heart of the capital. The investment sticks to the conventional deal structure in the sector, where an investor puts money in project development arms (click here to read about the recent revival in an alternate investment route taken by PE investors in real estate).
“We hope that this investment is a beginning of a new relationship with GIC at the project level. Going forward, such project level investments shall lead to unlocking of embedded value in many of DLF’s development projects,” said Saurabh Chawla, senior executive director – finance, DLF Ltd.
Loh Wai Keong, managing director and co-head Asia, GIC Real Estate, said, “GIC is confident in India’s long-term growth potential and we look forward to partnering DLF, a leading real estate developer in India, to tap into the attractive opportunities of India’s real estate sector.”
GIC has backed several Indian developers and has become one of the top large investors in the asset class over the last two years.
Both GIC and DLF indicated that they would be interested in taking the relationship forward and collaborate for more projects. Debt-laden DLF, the top public listed realtor, had been exploring opportunities to raise capital from private equity firms at the project level after its non-core asset sales did not help meet its target of pruning outstanding debt.
In its latest analyst presentation, it said that it is committed to reduce and improve the quality of debt. It also mentioned that it is tapping banking and capital market to secure long-tenure debt apart from exploring opportunities with PE investors.
Though DLF has taken a slew of measures to bring down its debt, it continues to hover around Rs 21,000 crore. It has divested its non-core assets ranging from hospitality business to land parcels in an attempt to bring down debt substantially.
As of June 30, 2015, it had total net debt of Rs 21,598 crore across its development and rental arm.
The developer has also raised back to back capital through non convertible debentures (NCDs). In August alone, it raised a total of Rs 1,375 crore in two tranches through debentures in an attempt to increase cash flow.
In the first quarter of FY16, the realtor reported a 5 per cent decline in net profit to Rs 121.55 crore. However, its total income increased to Rs 2,345.62 crore against Rs 1,851.6 crore in the year-ago period.
The real estate market is going through a tough time with Delhi NCR among the worst hit. The sales momentum in the region has gone down substantially over the last couple of years and the unsold stock stands at an all-time high.
DLF has tried to expand its footprint nationally but its business is largely restricted to Delhi NCR, especially Gurgaon.
DLF scrip rose over 5 per cent and was quoting at Rs 111.25 a share at 1PM in a weak Mumbai market on Wednesday.
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