GIC To Buy DLF Promoter’s Stake In Office Assets Holding Subsidiary
DLF seeks to deleverage by selling stake in commercial arm to GIC Singapore.
The board of DLF Ltd., on Monday approved a proposal for promoter group companies to sell stake in DLF Cyber City Developers Ltd. (DCCDL) to an affiliate of GIC Singapore, the company said in a statement to the stock exchanges on Wednesday.
DCCDL is the office assets holding arm of DLF.
Together, the promoter companies Rajdhani Investment & Agencies Pvt., Buland Consultants and Investments Pvt. and Sidhant Housing and Development Company hold 15.96 crore cumulative compulsorily convertible preference shares (CCPS) in this arm.
DCCDL had issued 15.96 crore or Rs 1,600 crore worth of CCPS in 2009 to promoter entities, when the rental entity was merged with the promoters' real estate arm. Post-conversion into equity shares, the promoters would own 40 percent in the subsidiary DCCDL.
This 40 percent promoter stake will be transferred to the GIC affiliate as part of the arrangement. DLF holds the remaining 60 percent in the subsidiary.
The conversion period for CCPS issued to the promoters has been extended by one year at their request to facilitate the stake sale, the company said.
Since the conclusion of CCPS Sale Transaction may not consummate by March 18, 2017 which being the last date of conversion of CCPS, the CCPS Holders have conveyed to DCCDL and the Company that they are agreeable for extension in conversion of CCPS for one more year i.e., until March 18, 2018 at the existing dividend rate/coupon rate of 0.01 percent per annum.DLF’s Stock Exchange Filing
DLF did not disclose the value at which the stake will be sold to GIC.
The stake acquisition will help GIC get access to DCCDL’s 26.8 million square feet leased rental assets.
The company expects to complete the transaction by September this year, and thereafter it will seek regulatory approval for the transaction. The audit committee approved entry into the next phase of the process to negotiate definitive transaction documents, the statement said.
The Transaction
The promoter plans to use substantial portion of the proceeds from sale of CCPS to infuse equity into DLF to deleverage its balance-sheet. The extent of equity infusion would depend upon post-tax proceeds from sale, the company disclosed to the stock exchange. The company had Rs 27,812 crore in gross debt at the end of December 31, 2016. The promoters’ equity infusion will increase their stake in the company beyond 75 percent. The promoters currently hold 74.95 percent.
The breach of 75 percent will violate SEBI’s minimum public shareholding guideline, which requires a company to have at least 25 percent in public shareholding. The company is expected to seek regulatory nod seeking time to reduce excess promoter shareholding through a qualified institutional placement, the company spokesperson told BloombergQuint.