DLF promoters raise Rs3900 cr

DLF promoters have sold 170 million shares at Rs230/share to raise Rs3900 cr. The process, which was being overseen by Deutsche Bank and JP Morgan, started late Tuesday evening and closed before the stock market opened.

Proceeds from the sale are expected to be invested in DLF Assets Ltd (DAL), the promoter-owned real estate trust, which is in the midst of restructuring. Of this, around Rs 2,100 crore will be used to pay hedge fund DE Shaw, which had invested $400 in 2007 through optionally convertible preference shares. The rest will be used to repay part of DAL’s Rs 5,400 crore debt to DLF Ltd.

After the transaction, the promoters’ stake will drop to 78.6 per cent from the current 88.5 per cent. Asked about the sale, DLF Vice-Chairman Rajiv Singh said, “I am not in a position to react because bankers are advising us on the issue.”

Meanwhile, in a separate transaction DLF is expected to acquire DAL for Rs 7,500 crore. This effectively means DAL will have to incur a loss of Rs 2,500 crore, since it acquired assets from DLF for Rs 10,000 crore in 2007-08.

Apart from DE Shaw, DAL raised $700 million from Symphony Capital through optionally convertible preference shares with a coupon rate of 4 to 6 per cent to fund the asset acquisition from DLF.

D E Shaw was assured of an exit route from DAL after a planned listing on the stock exchange in two years. That route has closed since the real estate market has crashed and is unlikely to see a revival of interest from equity investors in the near future.

Although the due diligence of DAL is complete, sources said the transaction would be concluded after DE Shaw is paid. DAL, after getting the fund infusion from promoters is expected to pay off DE Shaw so to conclude the transaction, sources said.

DLF cannot raise money through new equity offering

Promoters of the company are holding more than 88% of the common stock. However they don't have option to raise money through equity. According to section 77A of the Company Act (buy-back provisions), a company buying back its own shares is prohibited from making further issue of shares (for six months) following the completion of buyback. According to notification dated 15th October, 2008, the company is expected to complete the buy-back process by July 9, 2009. This efectively means that DLF cannot raise money through equity markets untill January 2010.

This is not in favor of DLF especially during (1) times of renewed optimism in equity markets and (2) when peers like Unitech and Sohba are looking to aggresively reduce their balance-sheet leverage by offering additional stock.

No wonder DLF has approached the government to surrender five of its nine IT-ITeS notified special economic zones (SEZ), according to a PTI report quoting a senior Commerce Ministry official. As per the SEZ Act, the tax-free enclaves cannot be surrendered once they become operational. DLF, however, has not started work on the five SEZs that it wants to surrender. Its nine notified SEZs are located in various states. According to official data, the land bank of DLF's nine notified SEZs include 10.61 hectares near Hyderabad, 10.12 hectares in Gandhinagar, 12.06 hectares and 10.73 hectares in Gurgaon, 10.24 hectares in Sonepat, 10.33 hectares in Pune, 10.23 hectares in Bhubaneswar, 13.29 hectares in Kanchipuram and 10.48 hectares in Kolkata. It is not clear which SEZs are now sought to be cancelled.

Furthermore, recent press reports indicate that the firm has decided to shelve plans of its ambitious hotel (sells saket hotel for Rs55 crores) and wind power projects (refer to link http://mergers-in-india.blogspot.com/2009/03/dlf-to-sell-its-wind-power-business.html) for cash constraints

Capital raising activity picks up in real estate

The risk appetite is back! otherwise how could we see real estate companies/REITs gobble up a few billion dollars in capital raising over the last 2 weeks- Prologis, a warehousing REIT has raised $1 billion in stock offering.

This definitely sounds good news for Indian developers who are saddled with debt (DLF has Rs15,000 cr and Unitech has Rs8,500 cr debt) and would wish to raise capital as and when possible. Unitech has already moved fast to lap up the opportunity and is doing a road show for its $250 million QIP.

ProLogis raises $1 billion in stock offering
ProLogis PLD.N, a U.S. owner and developer of warehouses, raised $1 billion in a stock offering and plans to use the proceeds to pay down debt.
The company sold 152 million common shares for $6.60 per share in a public offering. The underwriters have a 30-day option to buy up to 22.8 million additional shares to cover over-allotments.
ProLogis shares have suffered more than most REITs because of its huge debt load. The REIT said the money will be used to reduce the balance due on the $3.8 billion of its debt that matures during the next two years. The company has vowed to reduce its debt by $2 billion in 2009. Last week Standard & Poor's Ratings Services took ProLogis off of CreditWatch. The outlook is negative.
Source: http://uk.reuters.com/article/bondsNews/idUKN0851479820090408

Kimco raises US$717 mn in stock offering; larger than expected demand
Shares of shopping center owner Kimco Realty Corp KIM.N closed up 25.5 percent on Friday after strong demand for its stock offering prompted the company to increase the number of shares offered, lifting the badly beaten real estate investment trust (REIT) sector. Kimco sold 91.5 million shares, up from the previously expected 70 million, after demand was stronger than expected. The shares were offered at $7.10 each. After the close of the market, the company said its underwriters exercised an option to sell an additional 13.725 million shares, up from the previously planned 10.5 million over-allotment,

Unitech plans $250mn QIP issue to part-pay debt
http://mergers-in-india.blogspot.com/2009/04/unitech-plans-250mn-qip-issue-to-part.html

DLF, DAL raise Rs 1,100-cr debt from HDFC Bank
http://mergers-in-india.blogspot.com/2009/04/dlf-dal-raise-rs-1100-cr-debt-from-hdfc.html

DLF, DAL raise Rs 1,100-cr debt from HDFC Bank

The country’s largest property firm DLF and its promoter group company DLF Assets (DAL) have together raised around Rs 1,100 crore as debt from HDFC Bank through lease rental discounting (LRD) of their properties. The fresh round of debt raising will ease cash flow at DLF.
A DLF spokesperson declined to comment on fund raising, but two senior company executives confirmed the raising of debt through LRD. LRD allows a property owner to raise funds against the expected rentals from the property in future.
Privately held DAL has raised around Rs 800 crore while DLF has raised the rest. The fresh debt will help DAL pay DLF for the properties it had earlier purchased. As of December 2008, DAL owed Rs 5,400 crore to DLF.
DLF had earlier raised over Rs 3,000 crore in debt from Punjab National Bank (PNB), Life Insurance Corporation (LIC), State Bank of India (SBI) and Bank of India (BoI) between December and February, mainly to repay short-term debt.
DLF’s impressive sales and profit figures in the past several quarters were significantly based on its transactions with DAL, a company floated by DLF’s promoter KP Singh. Property sales to DAL contributed 43.5% to revenues and 35% of DLF’s profit before tax for the December 2008 quarter.
DAL, which has attracted investments from the US hedge fund DE Shaw ($400 million) and UK-based Symphony Capital (estimated $650 million), was originally proposed to be listed on the Singapore Stock Exchange, as a real estate investment trust. The global economic downturn, however, forced DLF to change its plan last year, and the company has since been trying to raise equity in DAL through private placement.
While announcing the December quarter earnings, DLF vice-chairman Rajiv Singh had said that DAL will raise around Rs 2,000 crore through private equity deals. He said that DAL would raise the same amount through lease rental discounting, if equity deals didn’t materialise.
Market analysts see the rising receivables from DAL, as the single-biggest concern for DLF. Meanwhile, DE Shaw is also looking at exiting its investment in DAL and any loss to it on account of a fall in market value of DAL has to be compensated by DLF promoters. As per JP Morgan’s estimates, DAL’s market value has fallen to $1.5 billion from $2.2 billion in 2007.
In view of this, DLF is weighing several options aimed at extinguishing receivables from DAL and help DE Shaw exit DAL.
First is to let DAL raise funds through LRD and pass that on to DLF, which would then use the money to buy DE Shaw’s investment in DAL.
Second option is to convert entire receivables into equity in DAL. This would mean DLF picking a majority stake in DAL. “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 through converting outstanding debtors on balance sheet to an equivalent stake at an appropriate cap rate,” said JP Morgan in a recent report.
Third option being discussed by DLF management is to merge DAL with itself. This may probably require DLF to raise debt to buy DE Shaw’s investment in DAL, following which DAL will be merged with DLF. The merger may entail DLF issuing convertible bonds to Symphony Capital. DLF can’t issue fresh shares to Symphony, a foreign investor, as the realty company is also executing many non-FDI compliant projects.

Source: http://economictimes.indiatimes.com/News-/DLF-DAL-raise-Rs-1100-cr-debt-from-HDFC-Bank/articleshow/4382390.cms

Companies line up for DLF’s wind business

Several Indian and overseas companies have shown interest in acquiring the wind power business of DLF Ltd, India’s largest real estate developer by market value, which is seeking to raise money by selling assets outside of its main business.
Adani Group, Essar Power Ltd, Infrastructure Leasing & Financial Services Ltd, Hong Kong-based CLP Group and the UK’s BG Group Plc have evinced interest in the unit, said a person close to the development who didn’t want to be identified. An executive at one of the firms independently confirmed that his company was interested in the business. He also didn’t want to be identified.

DLF plans to sell assets that are “non-strategic” to its main business of property development and reorganize debt as it weathers a downturn in the real estate market. The company expects to raise Rs2,000 crore by selling assets such as the wind power business.
DLF’s plan to divest its wind power generation business was reported on Tuesday by Business Standard newspaper, which cited unnamed people in the company as saying it intended to use the proceeds for a more related business.
DLF has net debt of around Rs13,000 crore, according to the company. At Rs24,750 crore, the company’s net worth (equity and reserves) as of 31 December 2008 was far higher than its net debt, according to a presentation DLF made to analysts.

DLF has hired audit and consulting firm Ernst and Young to help sell the wind power business, which has a capacity of 250MW, the person close to the development said. “These companies are doing due diligence to acquire the DLF wind power business. While CLP is looking at this opportunity through Roaring 40s, IL&FS’s wind-focused group is looking at this opportunity,” he added.
Roaring 40s is an equal joint venture between CLP and Australian power producer Hydro Tasmania. A DLF spokesperson declined to comment, saying the company is in its “silent period”—a time close to an earnings announcement when it is not allowed to make public statements. “Wind power is a vibrant and emerging sector and has a great potential,” said Vikas Kaushal, a partner at management consulting firm AT Kearney. “Globally, renewable (energy) is becoming a mainstream business. The short-term business outlook will have an impact on valuations. However, the fundamentals of wind business remain strong.” Rajiv Mishra, managing director of CLP Power India Pvt. Ltd, said, “We continue to remain interested in expanding our renewable portfolio in India. In the current financial crisis, there are a number of opportunities that have been brought to us and we are considering them.” Mint had on 12 January reported on CLP Group’s plans to take over power projects in the country that may be surrendered by developers, who find it tough to raise resources in a tightening credit market. Questions emailed to Adani Group and IL&FS remained unanswered, a BG spokesperson said in an email response that the company doesn’t comment on “market speculations”. “As a group, we keep evaluating growth opportunities, but as a policy we don’t comment on specific projects or speculation,” said an Essar Group spokesman.

DLF to sell its wind power business

Sun Pharmaceuticals Industries Ltd said the mediation to resolve its dispute with Israel&aposs Taro Pharmaceutical on the aborted merger of the two firms has failed. The mediation, as recommended by the Supreme Court of Israel earlier, was unsuccessful and no agreement was reached, Sun said in a communique to the Bombay Stock Exchange, adding it had informed the court on the development. "The company (Sun) is now awaiting a decision of the Supreme Court of Israel, "it added. Sun and Taro Pharma have been locked in a legal dispute over the former&aposs proposed USD 454 million takeover of the latter. The two pharma companies had signed a merger agreement in May 2007. Taro terminated the agreement in May last year, saying that the merger was not approved by its shareholders and that the price of USD 7.75 per share offered by Sun was not enough.

STREET VIEW: DLF is looking to take a stake in DAL

We present to you the views of different analysts across brokerage houses.

CSFB
The story so far …
DLF Assets Ltd (DAL), a promoter company, entered into an agreement to buy 13 mn sq ft of commercial assets from DLF at a 9% cap rate. Against this, DLF recognised revenues of Rs101.7 bn between FY07 and FY09E at an average rental of Rs58/sf/m and PBT of Rs68.2 bn (~Rs40/share). Of the 13 mn sq ft, 9 mn sq ft is to be completed and ~6 mn sq ft leased by March 2009. The purchase was financed by about Rs1 bn in promoter equity, Rs43.5 bn in private equity (PE) from D.E. Shaw (US$400 mn) and Symphony (US$675 mn). The total outstanding from DAL to DLF is expected to be about Rs57.2 bn (US$1.1 bn) as of March 2009.
Valuation loss due to adverse cap rate movement
Cap rates and valuations have moved adversely since DAL contracted to buy at a 9% cap rate from DLF. Yields for listed Indian commercial assets currently range from 13% to 20%. We believe the fair valuation for DAL today could be somewhere between 11% and 13% cap rate resulting in a Rs19-32 bn erosion in DAL’s asset value.
Loss on private equity transaction
Media reports suggest D.E. Shaw wants to exit from DAL and that it has been promised a USD-protected return. We estimate the potential loss on an assumed 12.5% return to be about US$172 mn on the D.E. Shaw investment. While we do not know Symphony’s terms, we estimate a further potential loss of about US$209 mn if it were on similar terms as D.E. Shaw’s.

Reliance Equities
Merger likely to result in a dilution of 10–15% in DLF. The DLF-DAL merger is likely to result in dilution of 10–15% in DLF (assuming DAL’s are valued at the sale price). DLF had sales of Rs 106.2 billion in FY08–9M FY09 (out of a total transaction value of Rs 150 billion) to DAL. DAL paid Rs 51.6 billion (entirely through private equity funding), while the rest Rs 54.6 billion is yet to be paid (receivables). The merger would bring DAL assets on DLF’s books, while DLF shares would be issued after netting the receivables.

Morgan Stanley
What may happen – OPTION 1: DLF could take a partial equity stake in DAL in lieu of receivables. OPTION 2: DLF could buy the entire equity of DAL and merge the company. In option 2, the valuation at which DLF would acquire DAL and who would pay for the difference will be the key. It appears that DLF could buy back the assets at a meaningfully higher cap rate (12% or so), implying 30% or so lower value.
What would this mean for DLF – In option 1, not much would change for DLF except that receivables would get promoted to investments. In option 2, P/L impact – DLF would get rental flow of Rs 6 bln pa (available to securitise), B/S impact – assumes $1.05 bln debt (DE Shaw/Symphony) and assets sold to DAL. Valuation difference would either result in book writedown (DLF bears the cost) or new receivable/cash (promoters bear the cost).
Our thoughts - We think that DLF should transition its business model to ‘third party’ sales and mark down its historical DAL sales to market value. Intrinsic value of 9.5 msf of now completed DAL assets is roughly Rs60 bln at 11% yield vs Rs110 bln booked by DLF. Stay U/W

DLF eyes minority stake in DAL to aid REIT listing

DLF is considering picking up minority stake in DLF Assets Limited (DAL), reports CNBC-TV18 quoting sources. This will help DLF Assets in their plans for real estate investment trust (REIT) listing plan and DLF will be its sponsor for the same. This move may also be aimed at reducing DAL’s Rs 5,000 crore receivables to DLF.
CNBC-TV18 also learns that DAL has been trying to raise USD 450 million from private equity investors since July. The deal, supposed to close by the end of this financial year, is likely to be delayed till April.

Some good news though for DLF Assets Limited as well as the shareholders of DLF is that other than 9.5 million squre feet that will be delivered to DAL by the end of this year, they are securitizing rent and hopefully raising about Rs 2,000 crore from three banks. So that should also help bring down receivables.

DLF to buy DCM Shriram mill land for Rs 1,600 cr

Real estate major DLF is set to close the Swatantra Bharat Mills (SBM) real estate deal with DCM Shriram Consolidated (DSCL) for over Rs 1,600 crore on Thursday. This will be the largest private sector land deal in the country and will give DLF access to about 38 acres of prime land, at a distance of just about 4-5 km from the capital’s central business district, Connaught Place.

Interestingly, the company had bought about 25 acres of land contiguous to the SBM plot in 2005. DLF already has an in-principle approval to develop an IT SEZ on this land.

Earlier this year, the company acquired another 2 acres in the same locality.

With the acquisition of SBM’s 38 acres, DLF will have a 65-acre contiguous landbank in Delhi. If the real estate major goes for an integrated township on this land, it will be the largest such project inside a city.

Also, this will probably be the first integrated township of its kind, combining an IT SEZ with a massive housing supply for those working in the SEZ.

(Source:Economic Times )

DLF to pump Rs 1,250 cr in DT Cinemas

Real estate behemoth DLF is likely to invest about Rs 1,250 crore on expanding its multiplex business, DT Cinema, by adding about 500 screen in the next four to five years.

"Currently, we are at a pre-operative stage with about seven screens. In another four to five years time the target is to have 500 screens across India," DT Cinema CEO Kajal Aijaz said.

By September this year, two DT Cinema complexes in Delhi and one in Chandigarh would be operational, she said, adding that 35 screens are expected to be functional in the next seven months.

On an average, setting up a screen can costs anything between Rs 2 crore to Rs 2.5 crore. Apart from north Indian cities, DT Cinema plans to set up multiplexes in Hyderabad, Chennai, Kochi, Bangalore, Mumbai, Pune, Ahmedabad, Goa and Kolkata. The size of each multiplex could be between 35,000 sq ft to 90,000 sq ft, she said.

(Source: Economic Times )