Realty player DLF has signed a joint venture (JV) agreement with Ridgewood Holding Ltd to develop seven residential projects in Bangalore, Chennai, Kochi and Indore.
In a BSE filing the company said, “It has been jointly decided by DLF and the Investor to realign the current shareholding arrangement in the JV companies in order to maintain continued focus of future development of various projects.”
In an interview with CNBC-TV18, Saurabh Chawla, Senior ED of Finance at DLF said that the rationale behind this JV is to increase focus on premium and luxury projects and Ridgewood will take 100 percent control in certain projects post re-alignment.
He added that post project completion, the leftover land will be taken under full control by either of the companies.Below is the verbatim transcript of Saurabh Chawla’s interview to Sonia Shenoy & Latha Venkatesh.
Latha: What does realign mean? Are you going to continue your partnership with Ridgewood at all?
A: Realignment means that there are certain projects in which they will take 100 percent control going forward and in certain projects we will take 100 percent control. So, at this stage it is 51:49 joint venture, but going forward after completing the existing projects and delivering them we will be realigning our shareholding with respect to those projects.
Sonia: Can you tell us what these projects are? How many will you take 100 percent control in, how many will you give to Ridgewood?
A: Ridgewood will take control eventually in places like Bangalore and a part of a project in Chennai whereas DLF will take full control of projects in again Chennai and some of the unsold portions in Kochi and Chennai. So, broadly that is how it is being done.
Latha: So, in terms of value how does the division happen, 50:50?
A: There is no value actually at price. So, it is just dividing the pie actually. So, there is no valuation or anything that has been ascribed to it.
Latha: After the completion of the contract of the projects respectively by DLF and by Ridgewood will you all continue the partnership with Ridgewood?
A: No, what I am saying is that there are existing projects which are at the last stage of completion and delivering to the customers. Once that is completed then in those existing projects the land that is left over, in some of the projects they will take 100 percent control and in some of the projects we will take 100 percent control. So, it is as simple as that.
Sonia: What is the quantum of projects which they will take 100 percent control of? You said there are some projects in Bangalore and Chennai but what is the quantum of those projects?
A: In Bangalore they will have about 100 odd acres of project yet to be started and launched and about 2.5 odd million square feet in Chennai which is yet to be launched. So, they will take control of that.
In Chennai there are certain projects which have - like in Old Mahabalipuram Road (OMR) too about 90 acres and Sriperumbudur we have about 240 acres. We will take control of those particular projects.
Sonia: What is the rationale behind this realignment?
A: If you look back for almost a year what we have been saying is that DLF will be focussing more on certain price segments of the market and in certain micro markets and this is in consonance with that strategy. In the residential space our focus will be on few cities across the country, mostly in premium and luxury projects, that is how we are moving forward.
The affordable segment at this stage, we would rather partner with somebody or actually exit out of those projects. So that is the strategy which we had articulated about a year or back and that is how it is being affected as on date.
Latha: Just wanted an update on the overall restructuring that the promoters are contemplated, the selling of that 40 percent stake in DLF Cybercity developers. What is the update, how much is done, have you found buyers?
A: First clarification, there is no restructuring. It is just a sale of a convertible instrument by the promoters. So, DLF with it's currently 60 percent effected equity in that entity and will always have that 60 percent going forward after the sale also. So, the dialogue is on with the investors. I can't give further details as you know that we are governed by confidentiality and whenever we have anything substantive we will of course disclose it to the markets.
Sonia: But is it true that you guys have got bids from a lot of players, the private equity (PE) players like Blackstone, GIC etc?
A: I can't really comment on specific names but yes, there has been a good amount of interest. If you look at world over there is a focus on investment on yield. The whole capital rise has moved to yield because of the variety of reasons and if you have a business which has yield plus also has hard real assets on the ground obviously the investor interest is high.
Sonia: Can you give us any kind of timeline on when you plan to complete the stake sale process? Can we expect something within this calendar year itself?
A: Yes, that is what we are working towards. India is a little unpredictable destination. You have regulatory approvals which sometimes are not under your control but we are working towards concluding the transactions within the current fiscal year.
Latha: DLF is debt free by the year end?
A: No comments on that.
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