India’s largest realty firm DLF on Wednesday sold about 50% stake each in two upcoming projects here to Singapore’s sovereign wealth fund GIC for Rs 1,990 crore.
Following the deal announcement, DLF stock moved up in Wednesday’s trade and continued the upward trend in today’s intraday trade. At 1155 hours, DLF stock was at Rs 118.6, a increase of Rs 8.21 or 9% in intraday trade today.
GIC entered into a joint venture to boost cash flow and reduce debt of the DLF’s arm DLF Home Developers Ltd (DHDL), and to do that, GIC will invest in two upcoming projects located in Central Delhi. DLF is raising private equity at project levels after a gap of 4-5 years.
“GIC will invest approximately Rs 1,990 crore. The JV is expected to benefit from GIC’s experience of investing in integrated developments across the globe,” DLF said in a statement.
It did not share the details of the joint venture, but sources said the realty major has sold around 50% shareholdings in the two upcoming projects, adjacent to its existing project ‘Capital Green’ at Moti Nagar here.
The Rs 1,990 crore investment by GIC is consideration for around 50 per cent shareholding in each of these projects, spread over about 25 acres, they said.
The deal will be completed once all statutory requirements are met. DLF would utilise this fund to meet operational cost and reduce debt, which stood at Rs 21,598 crore as on June 30.
With sluggish property market in last 2-3 years, DLF had announced in February that it would raise over Rs 3,000 crore through divestment or joint ventures in certain projects to improve cash flow and reduce debt.
“We hope that this investment is a beginning of a new relationship with GIC at the project level. We look forward to working together with GIC in many projects, both residential and commercial,” DLF Senior Executive Director Finance Saurabh Chawla said.
“Going forward, such project level investments shall lead to unlocking of embedded value in many of DLF s development projects,” he added.
DLF’s CEO Mohit Gujral said the joint venture with GIC will help the company to “potentially unleash many more signature developments and herald a new era of smart cities”.
Loh Wai Keong, Managing Director and Co-Head Asia, GIC Real Estate said: “GIC is confident in India’s long-term growth potential and we look forward to partnering DLF to tap into the attractive opportunities of India s real estate.” The company expects to collaborate with DLF on more projects in the future, he said.
GIC is a leading global investment firm with well over USD 100 billion in assets under management, while DLF is leading realty firm with a land bank of 300 million sq ft.
The development potential of the two JV projects would be about 5 million sq ft, largely residential. They will be launched within next 12 months, and developed over 5 years in phases, sources said, adding that construction will be outsourced to renowned company.
GIC has not made any advance payments and the investments would be made upfront after the necessary approvals, including from the competition watchdog CCI, within 2-3 months, they said.
In August 2007, DLF had bought 38 acres of land in central Delhi from DCM Shriram Consolidated and Lohia Group for Rs 1,675 crore. It later consolidated some more land parcels.
On some part of this land bank, the company is developing a housing project ‘Capital Green’ comprising 2,800 flats and it is expected to be completed soon.
In February, DLF CFO Ashok Tyagi had said the company plans to divest around 50 per cent stake each in four new housing projects to PE firms for over Rs 3,000 crore.
Sovereign wealth fund of Singapore has made many investments in the Indian real estate space.
In September last year, GIC entered into JV with Brigade Enterprises to invest up to Rs 1,500 crore for developing housing and mixed-use projects in South India. It invested about Rs 150 crore in two housing projects of Vatika Group.
It has also acquired majority stake in the Mumbai-based realty firm Nirlon Ltd for Rs 1,280 crore.
This year, GIC has invested in micro finance institution Bandhan Financial Services and app-based taxi aggregator Ola.
On its part, DLF has been selling non-core businesses and assets since last 3-4 years to focus on its core business and reduce debt. It has raised over Rs 10,000 crore through non-core divestments.
In June this year, DLF sold its cinema business DT Cinemas to movie theatre chain PVR Ltd for Rs 500 crore. The company had in February last year sold hospitality chain Amanresorts for Rs 2,200 crore.
That apart, DLF has exited from insurance and wind power businesses. It sold some non-core land parcels, including 17 acres in Mumbai to Lodha for Rs 2,700 crore.
Along with divestments of non-core assets, DLF has decided to monetise its residential and commercial assets to beat the slowdown in property sector that has affected its cash-flow.
It plans to launch Real Estate Investment Trusts (REITs) this fiscal to monetise rent-yielding commercial assets. DLF earns a rental income of about Rs 2,200 crore on commercial assets of about 30 million sq ft.