Realty major DLF plans to raise over Rs 3,000 crore by selling stakes in certain projects to private equity players and will launch two REITs next fiscal to improve cash flow and trim debt.
DLF, the country's largest realty firm, is in talks with various financial investors for raising funds in some of its housing projects and also for participation in its REITs platform for commercial properties. In its analyst presentation, DLF said it intends to keep the net debt of DevCo (development arm) range bound "through tactical divestments or JV's with strategic or financial investors of certain projects".
"Current value of deals in pipeline, at various stages of negotiations/due diligence/documentation exceeds Rs 3,000 crore," it added. The company is in dialogue with few private equity players for part cash out in some projects before launching in FY16, the presentation said. DLF's net debt has risen by nearly Rs 400 crore to Rs 20,336 crore as on December 31, 2014.
The current attributable net debt to DevCo (development arm) is Rs 6,350 crore and to RentCo (rental business) is about Rs 14,000 crore. While DLF wants to maintain the debt of DevCo at current level by raising private equity funds, the company plans to cut debt of RentCo through launch of REITs. "The groundwork on REITs is underway.
Many strategic and financial investors for REITs are in touch with us," DLF CFO Ashok Tyagi said in a conference call with analysts today. DLF Executive Director (Finance) Saurabh Chawla said the first REIT platform could come in the first half of next fiscal if the upcoming Budget provides some tax incentives and clarification, particularly on MAT (Minimum Alternate Tax). Nevertheless, he said the company would come up with REITs in some of the assets.
In the presentation, DLF said it will "form 2 REIT platforms to tactically monetise almost 30 million sq ft of commercial assets, thereby increasing cash flows and reducing debt". It further said that one REIT platform would be for office and other for retail asset. The company is in talks with both strategic and financial investors interested in partnering with the company for REIT.
In September 2014, market regulator SEBI had notified norms for listing of new business trust structure REITs that would help attract more funds in a transparent manner into the realty sector. DLF is on target to achieve an annuity income of about Rs 2,400 crore on an asset base of 30 million sq ft by end of this fiscal.
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