DLF is putting its house in order

DLF is putting its house in order
The Financial Express, December 15, 2009, Page 6

Akash Joshi

The DLF management's move to bring DLF Assets Ltd (DAL), a company owned by the promoters of DLF, into the fold of DLF CyberCity, has been on the cards for some time now. The Street believes the restructuring will improve transparency and bring to and end transactions between DLF and DLF Assets. According to analysts, there is unlikely to be any cash outflow from DLF and DLF CyberCity will issue warrants to the promoters. They are hoping that DLF should ultimately end up with stake close to 60% stake in Cyber City, the subsidiary in which the rental assets will be housed. The promoters of DLF will hold the remaining 40%. The merger will help monetise the combined rental assets, to be housed in the subsidiary DLF Cyber City, on the Singapore Stock Exchange. The management hopes to raise around $1.5 billion through the listing. Of course, investors will be looking forward to a swap ratio which is in favour of DLF.

DLF was selling finished properties to DAL, which, in turn, would rent them out. At the end of the September 2009 quarter, DLF Assets owed DLF around Rs 2,600 crore. In the June 2009 quarter, DAL had paid DLF Rs 2,500 crore. Analysts expect DLF's rental-yielding assets to increase by 20% from the existing 11 million sqft during 2009-10, thereby providing stability to the company revenues. The company's rental revenue, which in financial year 2010 stood at approximately Rs 500 crore, is likely to increase to Rs 750-800 crore by the end of the year. DLF's annuity income will increase as DAL currently has over 5 million sqft of lease-generating assets that are further expected to increase to 8 million sqft. DAL currently has 6.5 million sqft of commercial space earning rentals at an average of Rs 55-60/sqft. Besides another 6.5 million sqft is likely to be delivered over the next couple of years, say analysts at Prabhuda Lilladher. The stock closed at Rs 382.65, on Monday, marginally above its previous day close.