The Supreme Court of India on Wednesday rejected a plea of the Securities and Exchange Board of India (SEBI) to stall a stake sale in the rental arm of the country's biggest listed developer DLF Ltd.
The apex court allowed the company promoters to sell their shares in the unit DLF Cyber City Developers Ltd but added that the sale will be dependent on the final outcome of the case.
DLF is embroiled in a legal battle with the capital markets regulator SEBI over non-disclosure of important information during its initial public offering in 2007. Last year, SEBI had banned the company and its promoters from accessing the capital market for three years.
Subsequently, the Securities Appellate Tribunal cut the ban to six months though it noted that the company was engaged in sham deals. This six-month period ended in April 2015. SEBI had approached the apex court against the tribunal's ruling.
The top court's order paves the way for the promoters to sell their 40 per cent stake in the rental business. DLF owns the remaining 60 per cent stake in the unit.
Net debt rises
Meanwhile, DLF's net debt has risen to Rs 22,520 crore as of September 30 from Rs 21,598 crore three months before, according to a company presentation to analysts.
The latest attributable net debt to the development arm DevCo is Rs 8,220 crore and to the rental arm RentCo is Rs 14,300 crore, it said on Tuesday. Bulk of the rise in net debt was attributable to DevCo, though RentCo accounts for a majority of the net borrowings.
DLF's debt remains uncomfortably high even though the company has divested several non-core assets. Over the past couple of years it has sold its hospitality, insurance and wind power assets, apart from mortgage-backed, to bring down debt.
The company is also exploring the option of selling a stake to private equity players across its residential projects to cut debt. Recently, it formed a joint venture with Singapore's sovereign wealth fund GIC, which invested Rs 1,990 crore in two DLF projects. The developer is looking to raise funds from PE firms for more projects.
Indeed, the company has said its promoters will pump in a substantial portion of the proceeds from the stake sale in the rental business unit back into the listed flagship to reduce debt. VCCircle recently reported that the proposed stake sale has elicited interest from a slew of marquee investors and that GIC and Blackstone seem to be the front-runners for the deal.
Meanwhile, the company reported consolidated revenue of Rs 1,997 crore in the second quarter of 2015-16, down 15 per cent from Rs 2,346 crore in the first quarter. On a year-on-year basis, its revenue declined 7 per cent.
Its profit after tax rose to Rs 131 crore, up 8 per cent from the preceding quarter and 20 per cent higher from the year-earlier period.
The company said that the real estate industry has yet to see the benefit of the recent rate cuts by the Reserve Bank of India and that the sector continues to face liquidity issues, resulting in half-finished projects.