DLF Assets (DAL), a holding company owned by the promoters of DLF Ltd, the largest real estate developer in the country, is in talks with national banks and financial institutions to raise about Rs 2,500 crore as debt to pay back its parent firm.
The money, which is expected to be raised within 45 days, would come through as debt on securitisation of rentals or through lease rental discounting on Rs 600 crore of lease income DAL would be generating by
this fiscal end at the average rent rate of Rs 50 per
square feet.
DAL owes over Rs 5,000 crore to DLF for properties that it bought in the previous years.
A source familiar with the development said DLF would then invest the money at equity level or as an investor in DAL and provide an exit route to another investor.
“DE Shaw has been looking to exit DAL for a long time; so DLF could buy that stake, convert it into equity and own about 40% of the company. If some other investor also wants to exit, DLF might buy that stake in the future and own a larger portion of the company and get the tax-free rental income on its own balance sheet,” the source told DNA Money on condition of anonymity.
DAL has an investment of $400 million from D E Shaw and another $450 million from Symphony Capital, a London-based investment firm.
“DLF could look to buy a part stake in DAL at some stage to provide a one time resolution of balance sheet debtors. This could be done via converting outstanding debtors on the balance sheet to an equivalent stake at an appropriate cap rate. This could help boost the rental stream and help DLF earn additional returns on receivables, which currently are not generating any cash,” JP Morgan said in a research note to clients.
DAL will have about 9.5 million square feet of income-producing assets by end of March. It was looking for a real estate investment trust listing in Singapore last year in May but deferred it indefinitely due to volatile market conditions.
