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

HDFC-HDFC Bank merger talk hots up once again

There is a fresh buzz over a possible HDFC-HDFC Bank merger, following a report by MNC bank Macquarie Research. The report states how the ‘perfect match’ would yield ‘multi-year benefits’. According to a report by Macquarie Research, the upside would come from marrying HDFC Bank’s liabilities base — the best in the country according to Macquaire — with HDFC’s ‘best-in-class’ loan origination franchise. “This would address the concerns over whether HDFC’s wholesale-funded model is scalable, as well as, fill a major gap in HDFC Bank’s asset portfolio. Cross-selling to HDFC’s large customer base would be a secondary opportunity,” the report added. According to Macquarie, HDFC has moved from being a minuscule player in the overall market to being a significant user of national resources. As Figure 6 shows, HDFC’s borrowings now comprise a significant share of incremental deposits in the system. And this will put some pressure on its long-term growth opportunities. We expect that by FY3/13E, HDFC will need bank funding to the extent of 2.8% of incremental bank deposits in the system, which is fairly large for a secondary borrower. Another hurdle for HDFC’s funding is single-borrower limits for banks. Banks cannot lend more than 15% of their total capital to any single borrower.

Bank Muscat likely to sell entire stake in HDFC Bank

Bank Muscat is likely to sell its entire 3% stake in HDFC Bank (acquired through 14% stake in CBOP).
Officials of the Omani bank were not immediately available to comment.

"The profit on stake sale will flow through the income statements and this would give comfort to additional losses expected from investments during first quarter of 2009 in addition to providing comfort to its capital adequacy levels." Bank Muscat's profit tumbled 83 percent in the fourth quarter as the bank booked impairment losses related to an investment in Pakistan's Saudi Pak Commercial Bank. Banks across the Gulf, the world's biggest oil-exporting region, have booked provisions for bad loans and written down investments as a global financial crisis and slump in oil prices brought to an end a regional economic boom late last year. "It started yesterday," EFG-Hermes analyst Alaa El Din Moustafa said of the buying activity in Bank Muscat shares, the most-heavily traded of the day. "Everybody thinks it is about this bank (stake) sale in India, which is why the stock is moving," Moustafa said. In February 2008, Bank Muscat said it had no plans to sell any stake in HDFC after the Indian bank agreed to buy Centurion Bank of Punjab
Bank Muscat owned about 14.02 percent of Centurion Bank, according to Indian stock exchange data at the time, which it converted into between 2.5 percent and 3 percent of HDFC Bank after the agreed takeover.