Thursday, May 14, 2009
FICCI seeks cut in peak personal tax rates by 5%
FICCI seeks cut in peak personal tax rates by 5%
The Economic Times, May 14, 2009, Page 11
Our Bureau NEW DELHI
INDUSTRIALISTS have urged for a cut in the peak personal income-tax rate by 5% in the forthcoming budget to boost consumer spending and revive industrial performance, which contracted 2.3% in March. In a pre-budget meeting with revenue secretary PV Bhide, a delegation from industry body Federation of Indian Chambers of Commerce and Industries (Ficci), comprising its president Harsh Pati Singhania and Bharti Enterprises vice-chairman and managing director Rajan Mittal, pressed for reduction in personal income-tax and corporate tax to 25%.
At present, the maximum income-tax rate of 30% is applicable on income above Rs 5 lakh. This rate should be levied on an income of over Rs 10 lakh, the chamber said, to leave more money in the hands of consumers. Corporate houses are also taxed at 30%.
Mr Singhania also favoured broad-based fiscal reform to push investment-led growth. He, however, admitted there is little scope for more tax sops given the government’s weak financial position. “This year, there is a particularly difficult situation due to the revenue deficit and I think the government has limited scope for doing things,” Mr Singhania told reporters after meeting revenue secretary Bhide.
The new government is likely to present the Union budget in two months. The outgoing UPA government tabled the interim budget in February and sought Parliament’s nod to spend money to meet expenditure till July.
The Ficci delegation also demanded giving incentives for investment in agriculture, continuation of tax benefits for housing, telecom and power sectors.
The Economic Times, May 14, 2009, Page 11
Our Bureau NEW DELHI
INDUSTRIALISTS have urged for a cut in the peak personal income-tax rate by 5% in the forthcoming budget to boost consumer spending and revive industrial performance, which contracted 2.3% in March. In a pre-budget meeting with revenue secretary PV Bhide, a delegation from industry body Federation of Indian Chambers of Commerce and Industries (Ficci), comprising its president Harsh Pati Singhania and Bharti Enterprises vice-chairman and managing director Rajan Mittal, pressed for reduction in personal income-tax and corporate tax to 25%.
At present, the maximum income-tax rate of 30% is applicable on income above Rs 5 lakh. This rate should be levied on an income of over Rs 10 lakh, the chamber said, to leave more money in the hands of consumers. Corporate houses are also taxed at 30%.
Mr Singhania also favoured broad-based fiscal reform to push investment-led growth. He, however, admitted there is little scope for more tax sops given the government’s weak financial position. “This year, there is a particularly difficult situation due to the revenue deficit and I think the government has limited scope for doing things,” Mr Singhania told reporters after meeting revenue secretary Bhide.
The new government is likely to present the Union budget in two months. The outgoing UPA government tabled the interim budget in February and sought Parliament’s nod to spend money to meet expenditure till July.
The Ficci delegation also demanded giving incentives for investment in agriculture, continuation of tax benefits for housing, telecom and power sectors.
DLF to raise Rs 10,000 crore in 3 years through asset sale
DLF to raise Rs 10,000 crore in 3 years through asset sale
The Economic Times, May 14, 2009, Page 17
Owners Sell 9.9% In DAL For Rs 3,860 Crore In Open Mkt Transactions
Sanjeev Choudhary & Chaitali Chakravarty, NEW DELHI
DLF, India’s largest real estate company, is looking to raise Rs 10,000 crore in the next 2-3 years through sale of its treasury investments, land parcels and real estate projects, said its vice-chairman Rajiv Singh.
Mr Singh’s family, promoters of the cashstrapped DLF, had sold 9.9% stake in the company on Wednesday for Rs 3,860 crore in open market transactions.
ET Now had first reported on Thursday that DLF promoters were selling stake. Capital group picked up close to 5% stake in DLF, while HSBC, GIC and Fidelity bought smaller stakes. The transactions were done at Rs 230 per share. DLF shares closed marginally down at Rs 234 at NSE on Wednesday.
On the timing of the stake sale, Mr Singh said, “If it was the best or the worst, one would know only in hindsight, but it was surely the right solution in the current circumstances.” DLF had mopped up Rs 9,000 crore in an IPO less than two years ago. The company’s shares had peaked in January 2008, crossing Rs 1,200 but declined to a low of Rs 124 earlier this year.
Mr Singh said he started thinking of the stake sale only a few weeks back, adding a successful qualified institutional placement (QIP) by rival realty firm Unitech too played a part in promoter’s decision to sell stake. “Unitech’s QIP did give a positive signal that investors were interested in buying stocks. It really helped,” he said.
The funds raised through the stake sale will be advanced to privately held promoter group company DLF Assets (DAL), which purchases properties from DLF. Mr Singh said he was still working on the form of fund infusion in DAL, as to whether it will be in the form of equity or some other instrument. The fund infusion in DAL will be used to buy hedge fund DE Shaw’s $400 million (Rs 2,000 crore) investment in DAL and also to pay back to DLF around Rs 1,600 crore.
Besides this, DAL is expecting to raise Rs 2,000 crore in debt through securitising its rental income this year. Together, these fund raising initiatives at DAL will bring down DLF’s receivables from DAL from Rs 4,900 crore to around Rs 1,300 crore.
A panel of independent directors is working on ways to integrate DLF and DAL. DAL will continue to exist as an independent entity, but its ownership may change, Mr Singh said. Therefore, DAL will not be merged with DLF, but may become a subsidiary of DLF.
While elaborating on DLF’s plans to raise Rs 10,000 crore through sale of assets and its portfolio of investments, Mr Singh did not give details of its portfolio of investments, but said negotiations with buyers are currently under way. The company will also sell some of its hotel projects and certain businesses such as wind power to raise the amount.
The sale proceeds will be used to repay part of DLF’s Rs 14,000 crore debt. “Our target is to halve our debt this year,” he said. The assets that will be disposed off are “not contributing revenue in the short-term and are not strategic in the long-term”, he said.
DLF had earlier this month said it would raise Rs 5,500 crore through asset sale in FY10. The company expects to raise Rs 3,500 crore by the beginning of the third quarter this fiscal. The sale of promoter’s stake has come just days after the closure of DLF’s buyback programme, which had attracted criticism from some analysts for not making the best use of cash. Mr Singh defended his decision saying, “The company decided on buyback at a time when the economy was still not falling off the cliff.”
On housing market, Mr Singh said the demand has started picking up. “The worst is over. But I will still be cautious and say that recovery is at least four to five months away,” he said, adding that he didn’t see scope for further price correction.
The Economic Times, May 14, 2009, Page 17
Owners Sell 9.9% In DAL For Rs 3,860 Crore In Open Mkt Transactions
Sanjeev Choudhary & Chaitali Chakravarty, NEW DELHI
DLF, India’s largest real estate company, is looking to raise Rs 10,000 crore in the next 2-3 years through sale of its treasury investments, land parcels and real estate projects, said its vice-chairman Rajiv Singh.
Mr Singh’s family, promoters of the cashstrapped DLF, had sold 9.9% stake in the company on Wednesday for Rs 3,860 crore in open market transactions.
ET Now had first reported on Thursday that DLF promoters were selling stake. Capital group picked up close to 5% stake in DLF, while HSBC, GIC and Fidelity bought smaller stakes. The transactions were done at Rs 230 per share. DLF shares closed marginally down at Rs 234 at NSE on Wednesday.
On the timing of the stake sale, Mr Singh said, “If it was the best or the worst, one would know only in hindsight, but it was surely the right solution in the current circumstances.” DLF had mopped up Rs 9,000 crore in an IPO less than two years ago. The company’s shares had peaked in January 2008, crossing Rs 1,200 but declined to a low of Rs 124 earlier this year.
Mr Singh said he started thinking of the stake sale only a few weeks back, adding a successful qualified institutional placement (QIP) by rival realty firm Unitech too played a part in promoter’s decision to sell stake. “Unitech’s QIP did give a positive signal that investors were interested in buying stocks. It really helped,” he said.
The funds raised through the stake sale will be advanced to privately held promoter group company DLF Assets (DAL), which purchases properties from DLF. Mr Singh said he was still working on the form of fund infusion in DAL, as to whether it will be in the form of equity or some other instrument. The fund infusion in DAL will be used to buy hedge fund DE Shaw’s $400 million (Rs 2,000 crore) investment in DAL and also to pay back to DLF around Rs 1,600 crore.
Besides this, DAL is expecting to raise Rs 2,000 crore in debt through securitising its rental income this year. Together, these fund raising initiatives at DAL will bring down DLF’s receivables from DAL from Rs 4,900 crore to around Rs 1,300 crore.
A panel of independent directors is working on ways to integrate DLF and DAL. DAL will continue to exist as an independent entity, but its ownership may change, Mr Singh said. Therefore, DAL will not be merged with DLF, but may become a subsidiary of DLF.
While elaborating on DLF’s plans to raise Rs 10,000 crore through sale of assets and its portfolio of investments, Mr Singh did not give details of its portfolio of investments, but said negotiations with buyers are currently under way. The company will also sell some of its hotel projects and certain businesses such as wind power to raise the amount.
The sale proceeds will be used to repay part of DLF’s Rs 14,000 crore debt. “Our target is to halve our debt this year,” he said. The assets that will be disposed off are “not contributing revenue in the short-term and are not strategic in the long-term”, he said.
DLF had earlier this month said it would raise Rs 5,500 crore through asset sale in FY10. The company expects to raise Rs 3,500 crore by the beginning of the third quarter this fiscal. The sale of promoter’s stake has come just days after the closure of DLF’s buyback programme, which had attracted criticism from some analysts for not making the best use of cash. Mr Singh defended his decision saying, “The company decided on buyback at a time when the economy was still not falling off the cliff.”
On housing market, Mr Singh said the demand has started picking up. “The worst is over. But I will still be cautious and say that recovery is at least four to five months away,” he said, adding that he didn’t see scope for further price correction.
DLF promoters plan DAL listing in 18-24 months
DLF promoters plan DAL listing in 18-24 months
Business Standard, May 14, 2009, Page 1
Arun Kumar / New Delhi
Plan to use proceeds to halve realtor’s debt.
After infusing Rs 3,860 crore into DLF Assets Ltd (DAL) by selling a 9.9 per cent stake in realty major DLF to institutional investors this morning, promoters K P Singh and family plan to list the real estate investment trust in the next 18 to 24 months, Rajiv Singh, vice-chairman of DLF Ltd, said.
The group also plans to nearly halve DLF's debt from Rs 13,958 crore to Rs 7,000 crore by the end of the current financial year by selling around Rs 5,500 crore worth of assets and raising Rs 2,000 crore from the DAL listing, said Singh. Wednesday's divestment will also help reduce DLF's debt by around Rs 1,500 crore since this amount will be given to DAL to repay part of the Rs 4,900 crore it owes the realtor, he added.
DLF's promoters will also use around Rs 2,100 crore of the money from Wednesday's sale to buy out DE Shaw's $400 million investment in DAL that was made in 2007 through optionally convertible preference shares.
DAL is a real estate investment trust wholly owned by the promoters floated to acquire DLF's commercial properties.
DAL had planned to list in Singapore but had to shelve the proposal after the global meltdown.
“Our immediate focus is to integrate DAL with DLF. Its contour will depend upon the reports of the independent committee that was set up by the DLF board to suggest a way forward for integration”, Singh, who is DLF chief K P Singh’s son, said.
DLF’s stake sale, which began late Tuesday night, attracted 35 to 40 buyers, the largest being Capital International, which invested $200 million. HSBC, Fidelity, Euro Pacific Growth Fund and Copthall Mauritius Investment Ltd were the other major buyers through bulk deals on the stock exchange.
Wednesday’s transaction took place at just above Rs 230 per share, 2.6 per cent below yesterday’s closing price and much lower than DLF’s IPO price of Rs 525 a share. Following the announcement, the shares of the company surged 7.89 per cent in early trade.
Meanwhile, DAL is raising Rs 2,000 crore through lease rental discounting (raising debts from banks by mortgaging lease rentals) that will be paid to DLF. After all its repayments, DLF’s total outstanding to DAL will come down to around Rs 1,400 crore.
On the issue of asset sales worth Rs 5,500 crore, Singh said that there was “clear visibility” on realising Rs 3,500 crore and work is in progress for another Rs 2,000 crore.
The company is also aiming to exit some high-cost projects that will release much-needed cash. For instance, the company is looking at exiting the Delhi Convention Centre in Dwarka by returning the land to the Delhi Development Authority. This will help release around Rs 850 crore.
Sources said the company has also approached the Haryana government to refund licence fees of around Rs 900 crore which it has deposited for various projects that were slated to start in near future.
Business Standard, May 14, 2009, Page 1
Arun Kumar / New Delhi
Plan to use proceeds to halve realtor’s debt.
After infusing Rs 3,860 crore into DLF Assets Ltd (DAL) by selling a 9.9 per cent stake in realty major DLF to institutional investors this morning, promoters K P Singh and family plan to list the real estate investment trust in the next 18 to 24 months, Rajiv Singh, vice-chairman of DLF Ltd, said.
The group also plans to nearly halve DLF's debt from Rs 13,958 crore to Rs 7,000 crore by the end of the current financial year by selling around Rs 5,500 crore worth of assets and raising Rs 2,000 crore from the DAL listing, said Singh. Wednesday's divestment will also help reduce DLF's debt by around Rs 1,500 crore since this amount will be given to DAL to repay part of the Rs 4,900 crore it owes the realtor, he added.
DLF's promoters will also use around Rs 2,100 crore of the money from Wednesday's sale to buy out DE Shaw's $400 million investment in DAL that was made in 2007 through optionally convertible preference shares.
DAL is a real estate investment trust wholly owned by the promoters floated to acquire DLF's commercial properties.
DAL had planned to list in Singapore but had to shelve the proposal after the global meltdown.
“Our immediate focus is to integrate DAL with DLF. Its contour will depend upon the reports of the independent committee that was set up by the DLF board to suggest a way forward for integration”, Singh, who is DLF chief K P Singh’s son, said.
DLF’s stake sale, which began late Tuesday night, attracted 35 to 40 buyers, the largest being Capital International, which invested $200 million. HSBC, Fidelity, Euro Pacific Growth Fund and Copthall Mauritius Investment Ltd were the other major buyers through bulk deals on the stock exchange.
Wednesday’s transaction took place at just above Rs 230 per share, 2.6 per cent below yesterday’s closing price and much lower than DLF’s IPO price of Rs 525 a share. Following the announcement, the shares of the company surged 7.89 per cent in early trade.
Meanwhile, DAL is raising Rs 2,000 crore through lease rental discounting (raising debts from banks by mortgaging lease rentals) that will be paid to DLF. After all its repayments, DLF’s total outstanding to DAL will come down to around Rs 1,400 crore.
On the issue of asset sales worth Rs 5,500 crore, Singh said that there was “clear visibility” on realising Rs 3,500 crore and work is in progress for another Rs 2,000 crore.
The company is also aiming to exit some high-cost projects that will release much-needed cash. For instance, the company is looking at exiting the Delhi Convention Centre in Dwarka by returning the land to the Delhi Development Authority. This will help release around Rs 850 crore.
Sources said the company has also approached the Haryana government to refund licence fees of around Rs 900 crore which it has deposited for various projects that were slated to start in near future.
Singhs sell 10% in DLF to prop up group firm
Singhs sell 10% in DLF to prop up group firm
The Financial Express, May 14, 2009, Page 1
Corporate Bureau, New Delhi
The KP Singh family, promoters of DLF Ltd, on Wednesday sold a 9.9% stake in the company to raise about Rs 3,860 crore. The proceeds will be routed to DLF Assets Ltd (DAL), also promoted by the Singh family. DAL will use the money to meet its contractual obligations to DLF, to which it owes about Rs 5,000 crore, and for buying out DE Shaw’s stake in DAL.
The sale of 16.8 crore DLF shares took place just above Rs 230 apiece, 2.6% below Tuesday’s closing price and far lower than DLF’s IPO price of Rs 525 a share.
The news pushed up the DLF share to a high of Rs 254 on the Bombay Stock Exchange on Wednesday, though it retreated later on profit booking, and closed down 1.59% at Rs 232.50.
DLF said the transactions, executed by Deutsche Bank and J P Morgan, generated strong response from “most of the large existing institutional shareholders as well as several high quality new accounts.”
“The quality of the company, use of proceeds and attractiveness of the sector helped the deal to sail through,” Sanjay Sharma, head of equity capital markets at Deutsche Bank, who was overseeing the deal, said.
Wednesday’s stake sale brought down the promoters’ holding in DLF, India’s largest realtor, to 78.6%.
A DLF statement said the promoters plan to use the net proceeds to infuse capital into DAL by subscribing to an appropriate instrument, or otherwise. DAL would use the infused capital to meet its contractual obligations towards DLF and its subsidiaries, the statement said.
The Singh family had floated DAL to acquire commercial properties of DLF. The Singhs had plans to list DAL in Singapore, but had to shelve the proposal because of the global financial crisis. DAL has been trying unsuccessfully to raise money through private equity funds to pay the Rs 5,000 crore it owes to DLF against the purchase of assets. Besides, one of its investors, D E Shaw, which invested $400 million in DAL in 2007, wants to exit the company.
DLF posted a 93% drop in its net profit for the quarter ended March 31, 2009, at Rs 159.05 crore.
FIIs lap up shares
The DLF stake sale saw record net equity investment by foreign institutional investors. On Wednesday, FIIs bought shares worth Rs 4,106.96 crore, according to provisional stock exchange figures. In the bulk deal executed on BSE, FIIs like Deutsche Securities Mauritius, Euro Pacific Growth Fund, Copthall Mauritius Investment Ltd and Capital Research Management together bought 91 million shares for Rs 2,100 crore.
The Financial Express, May 14, 2009, Page 1
Corporate Bureau, New Delhi
The KP Singh family, promoters of DLF Ltd, on Wednesday sold a 9.9% stake in the company to raise about Rs 3,860 crore. The proceeds will be routed to DLF Assets Ltd (DAL), also promoted by the Singh family. DAL will use the money to meet its contractual obligations to DLF, to which it owes about Rs 5,000 crore, and for buying out DE Shaw’s stake in DAL.
The sale of 16.8 crore DLF shares took place just above Rs 230 apiece, 2.6% below Tuesday’s closing price and far lower than DLF’s IPO price of Rs 525 a share.
The news pushed up the DLF share to a high of Rs 254 on the Bombay Stock Exchange on Wednesday, though it retreated later on profit booking, and closed down 1.59% at Rs 232.50.
DLF said the transactions, executed by Deutsche Bank and J P Morgan, generated strong response from “most of the large existing institutional shareholders as well as several high quality new accounts.”
“The quality of the company, use of proceeds and attractiveness of the sector helped the deal to sail through,” Sanjay Sharma, head of equity capital markets at Deutsche Bank, who was overseeing the deal, said.
Wednesday’s stake sale brought down the promoters’ holding in DLF, India’s largest realtor, to 78.6%.
A DLF statement said the promoters plan to use the net proceeds to infuse capital into DAL by subscribing to an appropriate instrument, or otherwise. DAL would use the infused capital to meet its contractual obligations towards DLF and its subsidiaries, the statement said.
The Singh family had floated DAL to acquire commercial properties of DLF. The Singhs had plans to list DAL in Singapore, but had to shelve the proposal because of the global financial crisis. DAL has been trying unsuccessfully to raise money through private equity funds to pay the Rs 5,000 crore it owes to DLF against the purchase of assets. Besides, one of its investors, D E Shaw, which invested $400 million in DAL in 2007, wants to exit the company.
DLF posted a 93% drop in its net profit for the quarter ended March 31, 2009, at Rs 159.05 crore.
FIIs lap up shares
The DLF stake sale saw record net equity investment by foreign institutional investors. On Wednesday, FIIs bought shares worth Rs 4,106.96 crore, according to provisional stock exchange figures. In the bulk deal executed on BSE, FIIs like Deutsche Securities Mauritius, Euro Pacific Growth Fund, Copthall Mauritius Investment Ltd and Capital Research Management together bought 91 million shares for Rs 2,100 crore.
DLF: Cash flows will improve
DLF: Cash flows will improve
Business Standard, May 14, 2009, Money & Markets, Section II, Page 1
Shobhana Subramanian / Mumbai
The rally in the markets has been useful to the promoters of DLF who have managed to sell a part of their stake to institutional investors; by placing shares at Rs 230, a 2.6 per cent discount to Tuesday’s closing price, they have raised approximately Rs 3,860 crore. The money may not come into DLF directly but it will be used to reduce DLF’s receivables from DLF Assets (DLF), a company owned by the promoters of DLF.
DAL’s outstandings to DLF are currently estimated at close to Rs 4,900 crore and any reduction in the exposure to DAL — even Rs 2,000 crore — is welcome, since it will ease DLF’s cash flows. Moreover, the management is exploring other ways to raise resources — about Rs 2,000 crore from the sale of assets for instance. Any move to bring down the debt on DLF’s balance sheet from around Rs 14,500 crore currently, and to reduce interest costs significantly, can only help the realty firm at a time when access to capital remains difficult.
With more cash in hand, the realty firm can go ahead with its construction plans. While the property market remains in a bit of a slump, the response to some of DLF’s residential projects in Bangalore and Hyderabad, positioned at lower price points, is believed to have been encouraging. The company reportedly plans to launch projects in both the high-value and mid-income segments covering about 14 million sq feet once its sees some more recover in demand.
Should the macroeconomic environment improve, it’s possible sales for DLF will pick up faster than expected — currently analysts are pencilling in revenues of around Rs 5,000 in the current year. The DLF stock rose about 4 per cent on Tuesday, in anticipation of the share-sale transaction, but lost some of those gains on Wednesday.
Business Standard, May 14, 2009, Money & Markets, Section II, Page 1
Shobhana Subramanian / Mumbai
The rally in the markets has been useful to the promoters of DLF who have managed to sell a part of their stake to institutional investors; by placing shares at Rs 230, a 2.6 per cent discount to Tuesday’s closing price, they have raised approximately Rs 3,860 crore. The money may not come into DLF directly but it will be used to reduce DLF’s receivables from DLF Assets (DLF), a company owned by the promoters of DLF.
DAL’s outstandings to DLF are currently estimated at close to Rs 4,900 crore and any reduction in the exposure to DAL — even Rs 2,000 crore — is welcome, since it will ease DLF’s cash flows. Moreover, the management is exploring other ways to raise resources — about Rs 2,000 crore from the sale of assets for instance. Any move to bring down the debt on DLF’s balance sheet from around Rs 14,500 crore currently, and to reduce interest costs significantly, can only help the realty firm at a time when access to capital remains difficult.
With more cash in hand, the realty firm can go ahead with its construction plans. While the property market remains in a bit of a slump, the response to some of DLF’s residential projects in Bangalore and Hyderabad, positioned at lower price points, is believed to have been encouraging. The company reportedly plans to launch projects in both the high-value and mid-income segments covering about 14 million sq feet once its sees some more recover in demand.
Should the macroeconomic environment improve, it’s possible sales for DLF will pick up faster than expected — currently analysts are pencilling in revenues of around Rs 5,000 in the current year. The DLF stock rose about 4 per cent on Tuesday, in anticipation of the share-sale transaction, but lost some of those gains on Wednesday.
Promoters sell 10% DLF stake
Promoters sell 10% DLF stake
Hindustan Times – Business, May 14, 2009, Page 21
Promoters sell 10% DLF stakeIn an apparent attempt to raise funds amidst staggering demand, a rising debt burden and an overall slump in their business, the promoters of the country’s largest real estate company DLF Ltd on Wednesday sold 10 per cent of their holdings in the firm to infuse capital in DLF Assets Limited (DAL), a property leasing arm separately controlled by the same promoters.
The cash infusion will yield Rs. 3,860 crore for the promoters, whose ambitious plans got hit last year when the local real estate business felt the pinch of the global financial meltdown. The buyers are DLF’s large institutional shareholders, but the company did not disclose details. Leading stakeholders include HSBC and Fidelity.
DAL buys properties built by DLF and then leases it out for rental income. Its business has been hurt by weak demand. Its revenues dropped to Rs 322 crore in the January-March quarter from Rs 1,845 crore a year ago. The new cash will be used to meet DAL’s obligations.
“The promoters may also use part of the net proceeds towards the purchase of DE Shaw’s (private equity) interest in DAL,” DLF said in a statement. “This transaction will put investor concerns regarding DAL liquidity to rest, as well as reduce the net exposure to DAL in DLF’s books.”
DLF may even consider merging DAL with itself at a later stage, company’s vice-chairman, Rajiv Singh said on television. “It could be a merger at a subsidiary level and 100 per cent purchase is also an option,” he said. DAL’s valuation is estimated between Rs 6,600 crore to Rs 7,000 crore, investment banking sources told Hindustan Times.
Experts tracking the sector see the stake sale as a significant but limited solution to DLF’s liquidity problems as the company creaks under debt that stood at Rs 13,958 crore on March 31.
“I expect the company restructuring would go on for another year or two,” said a senior real estate executive at a global consulting firm.
Hindustan Times – Business, May 14, 2009, Page 21
Promoters sell 10% DLF stakeIn an apparent attempt to raise funds amidst staggering demand, a rising debt burden and an overall slump in their business, the promoters of the country’s largest real estate company DLF Ltd on Wednesday sold 10 per cent of their holdings in the firm to infuse capital in DLF Assets Limited (DAL), a property leasing arm separately controlled by the same promoters.
The cash infusion will yield Rs. 3,860 crore for the promoters, whose ambitious plans got hit last year when the local real estate business felt the pinch of the global financial meltdown. The buyers are DLF’s large institutional shareholders, but the company did not disclose details. Leading stakeholders include HSBC and Fidelity.
DAL buys properties built by DLF and then leases it out for rental income. Its business has been hurt by weak demand. Its revenues dropped to Rs 322 crore in the January-March quarter from Rs 1,845 crore a year ago. The new cash will be used to meet DAL’s obligations.
“The promoters may also use part of the net proceeds towards the purchase of DE Shaw’s (private equity) interest in DAL,” DLF said in a statement. “This transaction will put investor concerns regarding DAL liquidity to rest, as well as reduce the net exposure to DAL in DLF’s books.”
DLF may even consider merging DAL with itself at a later stage, company’s vice-chairman, Rajiv Singh said on television. “It could be a merger at a subsidiary level and 100 per cent purchase is also an option,” he said. DAL’s valuation is estimated between Rs 6,600 crore to Rs 7,000 crore, investment banking sources told Hindustan Times.
Experts tracking the sector see the stake sale as a significant but limited solution to DLF’s liquidity problems as the company creaks under debt that stood at Rs 13,958 crore on March 31.
“I expect the company restructuring would go on for another year or two,” said a senior real estate executive at a global consulting firm.
Real estate mkt shows revival signs, grows 20%
Real estate mkt shows revival signs, grows 20%
The Financial Express, May 14, 2009, Corporates & Markets, Section I, Page 1
Mona Mehta, Mumbai
Acouple of major real estate deals in April has raised expectations of a revival in the real estate market, estimated at Rs 10,000 crore. According to Confederation of Real Estate Developer’s Associations of India (CREDAI), the market is growing by 15% to 20% compared to last year, but less sanguine estimates also pitch a dip in growth rate of sales of major real estate companies by 82% and net profit by 89% during the fourth quarter of the financial year 2008-09, over the previous corresponding quarter, as per the BSE Realty Index.
Cement major Lafarge India has recently set up its new aggregates and concrete (A&C) office division in Bandra East, Mumbai, which is an additional space to the company’s existing office which is also based in Nariman Point, according to Lafarge India spokesperson. Recently, the National Stock Exchange (NSE) has chosen Kohinoor City in Kurla for office space, which is strategically located from its main office tower at BKC. According to Atul Modak, head – Kohinoor City Project, “NSE, along with its group companies has purchased about 80,000 sq ft at Rs 15,000 per sq ft for a total Rs 80 crore.” According to sources at JLLM, commercial leasing in Delhi, Gurgaon, Noida, Hyderabad, Chennai, Kolkata, Pune and Bangalore too have started witnessing about 5% to 10% increase in volumes.
According to Rajeev Piramal, executive vice-chairman, Peninsula Land Ltd (PLL), “There are signs of revival in the real estate market, especially Mumbai, which is our core market. We hope to see demand pick up further in the second half of the year. Along with the real estate prices, land prices are also getting aligned.”
Commercial leasing has picked up by 5% in volume terms in the first quarter of 2009-10, according to real estate consultant Jones Lang LaSalle Meghraj (JLLM). Driving this growth are corporates who are now seeking to set up additional offices that offer them better space at lower costs. However, this is much lower than the 10% to 15% growth the leasing market saw during Q1 of 2008-09 , according to Abhishek Kiran Gupta, head – research, JLLM.
According to a recent report from JLLM, “The cost arbitrage for those shifting from Nariman Point to BKC and Bandra is more in terms of quality of buildings than in rentals. For those shifting to Goregaon, the cost saving is more than 50%. Currently, the commercial leasing in BKC is an average of between Rs 225 to Rs 350, Bandra East is between Rs 150 to Rs 175 per sq ft and Goregaon is between Rs 70 to Rs 125 per sq ft.”
Residential demand too has picked up by 30% to 40% in the affordable segment since March 2009, according to CREDAI. Lalit Kumar Jain, chairman, Kumar Builders and vice-president, CREDAI, told FE, “Residential demand is up 30% to 40% in the mid-to-low income segment since March 2009, for residential apartments priced below Rs 30 lakh. This is due to dip in real estate prices by about 30% in certain pockets of the metros, apart from better sense of job security.” However, according to Gupta, there is only 5% demand increase in the luxury home segment.
Gupta said, “Capital values in many micro-markets have corrected sufficiently to bring homes within the purview of affordability.”
The Financial Express, May 14, 2009, Corporates & Markets, Section I, Page 1
Mona Mehta, Mumbai
Acouple of major real estate deals in April has raised expectations of a revival in the real estate market, estimated at Rs 10,000 crore. According to Confederation of Real Estate Developer’s Associations of India (CREDAI), the market is growing by 15% to 20% compared to last year, but less sanguine estimates also pitch a dip in growth rate of sales of major real estate companies by 82% and net profit by 89% during the fourth quarter of the financial year 2008-09, over the previous corresponding quarter, as per the BSE Realty Index.
Cement major Lafarge India has recently set up its new aggregates and concrete (A&C) office division in Bandra East, Mumbai, which is an additional space to the company’s existing office which is also based in Nariman Point, according to Lafarge India spokesperson. Recently, the National Stock Exchange (NSE) has chosen Kohinoor City in Kurla for office space, which is strategically located from its main office tower at BKC. According to Atul Modak, head – Kohinoor City Project, “NSE, along with its group companies has purchased about 80,000 sq ft at Rs 15,000 per sq ft for a total Rs 80 crore.” According to sources at JLLM, commercial leasing in Delhi, Gurgaon, Noida, Hyderabad, Chennai, Kolkata, Pune and Bangalore too have started witnessing about 5% to 10% increase in volumes.
According to Rajeev Piramal, executive vice-chairman, Peninsula Land Ltd (PLL), “There are signs of revival in the real estate market, especially Mumbai, which is our core market. We hope to see demand pick up further in the second half of the year. Along with the real estate prices, land prices are also getting aligned.”
Commercial leasing has picked up by 5% in volume terms in the first quarter of 2009-10, according to real estate consultant Jones Lang LaSalle Meghraj (JLLM). Driving this growth are corporates who are now seeking to set up additional offices that offer them better space at lower costs. However, this is much lower than the 10% to 15% growth the leasing market saw during Q1 of 2008-09 , according to Abhishek Kiran Gupta, head – research, JLLM.
According to a recent report from JLLM, “The cost arbitrage for those shifting from Nariman Point to BKC and Bandra is more in terms of quality of buildings than in rentals. For those shifting to Goregaon, the cost saving is more than 50%. Currently, the commercial leasing in BKC is an average of between Rs 225 to Rs 350, Bandra East is between Rs 150 to Rs 175 per sq ft and Goregaon is between Rs 70 to Rs 125 per sq ft.”
Residential demand too has picked up by 30% to 40% in the affordable segment since March 2009, according to CREDAI. Lalit Kumar Jain, chairman, Kumar Builders and vice-president, CREDAI, told FE, “Residential demand is up 30% to 40% in the mid-to-low income segment since March 2009, for residential apartments priced below Rs 30 lakh. This is due to dip in real estate prices by about 30% in certain pockets of the metros, apart from better sense of job security.” However, according to Gupta, there is only 5% demand increase in the luxury home segment.
Gupta said, “Capital values in many micro-markets have corrected sufficiently to bring homes within the purview of affordability.”
Credit flow to real estate eases
Credit flow to real estate eases
Business Standard, May 14, 2009, Page 5
Raghavendra Kamath / Mumbai
Institutional money flow expected again into realty stocks.
Real estate developers, who were battling tight liquidity in the past few quarters, are breathing easier with banks now more inclined to lend.
Developers such as DLF, Unitech and Orbit are in the process of raising around Rs 5,000 crore in the current fiscal after they rolled over nearly Rs 9,000 crore debt subsequent to the Reserve Bank of India (RBI) allowing banks to restructure loans to developers.
“The situation is getting better with financial institutions restructuring our loans and looking into proposals for project execution. Even home buyers are coming in, depending on price, interest rates and locality,” said Pradeep Jain, chairman of Parsvnath Developers, which is looking at repaying Rs 400 crore debt in the next couple of months. However, said Jain, banks were charging 50-75 basis points more as interest while rolling over the debt.
Parsvnath rolled over Rs 800 crore debt last year from banks and financial institutions. Orbit rolled over Rs 190 crore debt in March 2009 for the next three years.
According to RBI data, loans to the real estate sector grew 61 per cent on a year-on-year basis, with Rs 90,765 crore outstanding as on February 27, 2009.
“Though the first half of 2009 was tough, debt is available for developers in metros now. The situation has improved from March. Our average borrowing rates are down from 14.5 per cent a year ago to 13-13.5 per cent now,” said Ramashraya Yadav, head of finance at Orbit Corporation, a Mumbai-based developer which is in the final stages of tying up Rs 140 crore debt to fund its projects.
Property developers had to borrow at hefty rates last year as banks shied away from lending after defaults from the sector went up and property valuations dropped. In addition, the central bank increased the risk weightage on loans to commercial real estate.
Developers had to sell their assets to reduce the mounting debt. While DLF is looking at raising Rs 5,500 crore through sale of hotels and its power unit, Unitech, another New Delhi-based company, has sold its Gurgaon hotel and stake in its telecom arm, Unitech Wireless, to raise funds.
Apart from enhanced bank funds, real estate developers are witnessing a revival in interest from overseas investors. The recent rally in stock markets and the success of Unitech’s $325 million (Rs 1,625 crore) qualified institutional placement (QIP) is encouraging developers to raise funds through the route. Indiabulls Real Estate is in talks with investors to raise at least $150 million from sale of shares to overseas investors.
According to S Subramanian, head of Investment Banking at Enam Securities, nearly $1 billion (Rs 5,000 crore) of institutional money is expected to be invested in Indian equities in the next six months, of which $500 million (Rs 2,500 crore) is expected to flow into realty stocks.
Developers expect liquidity to ease further once the general election results are announced and a there is clarity on who forms the next government.
“Banks and mutual funds have enough money with them. As the new government comes and the uncertainty on this front ends, credit availability will improve,” said JC Sharma, managing director of Bangalore-based Sobha Developers.
Still, consultants say developers may continue to face an uphill task for some more time before they can consider themselves out of the woods. Business consultancy KPMG’s Executive Director, Jai Mavani, believes banks are also asking developers to create liquidity within 16 to 18 months while restructuring their loans.
“If one is looking at increased liquidity as a sign of revival of the property market, that might not be the case as home buyers are opting for only those properties which are 35 to 40 per cent cheaper than the market price. Demand is lacklustre in the higher price segment,” he said.
On the equity market front also, developers are looking bullish. Mumbai-based Indiabulls Real Estate (IBREL) is in the market to raise $150 million as part of its plans to raise $600 mn to fund its power projects. Sobha is planning to raise $150 mn (Rs 750 crore) from equity markets.
“We have kept all our options open and will take a call at the right time,” said Sharma of Sobha Developers.
Business Standard, May 14, 2009, Page 5
Raghavendra Kamath / Mumbai
Institutional money flow expected again into realty stocks.
Real estate developers, who were battling tight liquidity in the past few quarters, are breathing easier with banks now more inclined to lend.
Developers such as DLF, Unitech and Orbit are in the process of raising around Rs 5,000 crore in the current fiscal after they rolled over nearly Rs 9,000 crore debt subsequent to the Reserve Bank of India (RBI) allowing banks to restructure loans to developers.
“The situation is getting better with financial institutions restructuring our loans and looking into proposals for project execution. Even home buyers are coming in, depending on price, interest rates and locality,” said Pradeep Jain, chairman of Parsvnath Developers, which is looking at repaying Rs 400 crore debt in the next couple of months. However, said Jain, banks were charging 50-75 basis points more as interest while rolling over the debt.
Parsvnath rolled over Rs 800 crore debt last year from banks and financial institutions. Orbit rolled over Rs 190 crore debt in March 2009 for the next three years.
According to RBI data, loans to the real estate sector grew 61 per cent on a year-on-year basis, with Rs 90,765 crore outstanding as on February 27, 2009.
“Though the first half of 2009 was tough, debt is available for developers in metros now. The situation has improved from March. Our average borrowing rates are down from 14.5 per cent a year ago to 13-13.5 per cent now,” said Ramashraya Yadav, head of finance at Orbit Corporation, a Mumbai-based developer which is in the final stages of tying up Rs 140 crore debt to fund its projects.
Property developers had to borrow at hefty rates last year as banks shied away from lending after defaults from the sector went up and property valuations dropped. In addition, the central bank increased the risk weightage on loans to commercial real estate.
Developers had to sell their assets to reduce the mounting debt. While DLF is looking at raising Rs 5,500 crore through sale of hotels and its power unit, Unitech, another New Delhi-based company, has sold its Gurgaon hotel and stake in its telecom arm, Unitech Wireless, to raise funds.
Apart from enhanced bank funds, real estate developers are witnessing a revival in interest from overseas investors. The recent rally in stock markets and the success of Unitech’s $325 million (Rs 1,625 crore) qualified institutional placement (QIP) is encouraging developers to raise funds through the route. Indiabulls Real Estate is in talks with investors to raise at least $150 million from sale of shares to overseas investors.
According to S Subramanian, head of Investment Banking at Enam Securities, nearly $1 billion (Rs 5,000 crore) of institutional money is expected to be invested in Indian equities in the next six months, of which $500 million (Rs 2,500 crore) is expected to flow into realty stocks.
Developers expect liquidity to ease further once the general election results are announced and a there is clarity on who forms the next government.
“Banks and mutual funds have enough money with them. As the new government comes and the uncertainty on this front ends, credit availability will improve,” said JC Sharma, managing director of Bangalore-based Sobha Developers.
Still, consultants say developers may continue to face an uphill task for some more time before they can consider themselves out of the woods. Business consultancy KPMG’s Executive Director, Jai Mavani, believes banks are also asking developers to create liquidity within 16 to 18 months while restructuring their loans.
“If one is looking at increased liquidity as a sign of revival of the property market, that might not be the case as home buyers are opting for only those properties which are 35 to 40 per cent cheaper than the market price. Demand is lacklustre in the higher price segment,” he said.
On the equity market front also, developers are looking bullish. Mumbai-based Indiabulls Real Estate (IBREL) is in the market to raise $150 million as part of its plans to raise $600 mn to fund its power projects. Sobha is planning to raise $150 mn (Rs 750 crore) from equity markets.
“We have kept all our options open and will take a call at the right time,” said Sharma of Sobha Developers.
Banks can reduce lending rates further: Subbarao
Banks can reduce lending rates further: Subbarao
Business Standard, May 14, 2009, Section II, Page 10
BS Reporter / Bangalore
Reserve Bank of India (RBI) Governor D Subbarao today said there was still scope for banks to reduce lending rates further.
“Given the current economic context, and given the policy initiatives of the RBI, there is a considerable scope for banks to reduce lending rates,” he said.
This is despite the fact that banks have already reduced lending rates by 50 basis points to 250 basis points which expanded bank credit, he added, while delivering the keynote address on ‘India and the Global Financial Crisis: Four Questions’, which was organised by the Karnataka chapter of the Confederation of Indian Industry here.
Subbarao also used the opportunity to point out that the several fiscal stimulus packages formulated by the government, together with monetary accommodation and counter-cyclical measures announced by the central bank, have started showing revival signs.
The RBI brought down the reverse repo rate by 575 basis points from 9 per cent to 3.25 per cent in the last few months, he said. With these measures in place, the RBI expected a growth rate of 6 per cent for 2009-10 and WPI-(wholesale price index) based inflation to reach 4 per cent by March 2010, he said.
“It is true that the Indian economy is slowing and exports have declined, services sector is decelerating, investment demand is on the decline and corporate margins are dented. However, growth moderation is steeper than thought earlier. The cyclical downturn was natural after four years of high growth. But, a growth of 6 per cent is certain,” Subbarao said.
He added that India’s economic recovery would be swifter and sharper than any other economy. But he was also quick to add that for India to recover the world has to recover. The challenge before the country is to minimise the pain of adjustment.
“We are not a demand-constrained economy. Once confidence is restored, there will be a faster recovery. However, we are a supply-constrained economy. Investment in manufacturing, infrastructure and services sectors needs to increase,” the RBI governor added.
Subbarao also said that there were some challenges ahead for India on the path to revival too.
“We should support the drivers of aggregate demand, increase private investment, maintain credit flow and credit quality, restore fiscal consolidation, manage government programming and implement fiscal stimulus vigorously. There is indeed enough money in the system for private demand to pick up,” he said.
Further, he said there were some positive features, such as normally functioning financial markets, the decline in inflation, comfortable foreign exchange reserves, a robust rural demand and social safety, an automatic stabiliser, which point to revival.
Business Standard, May 14, 2009, Section II, Page 10
BS Reporter / Bangalore
Reserve Bank of India (RBI) Governor D Subbarao today said there was still scope for banks to reduce lending rates further.
“Given the current economic context, and given the policy initiatives of the RBI, there is a considerable scope for banks to reduce lending rates,” he said.
This is despite the fact that banks have already reduced lending rates by 50 basis points to 250 basis points which expanded bank credit, he added, while delivering the keynote address on ‘India and the Global Financial Crisis: Four Questions’, which was organised by the Karnataka chapter of the Confederation of Indian Industry here.
Subbarao also used the opportunity to point out that the several fiscal stimulus packages formulated by the government, together with monetary accommodation and counter-cyclical measures announced by the central bank, have started showing revival signs.
The RBI brought down the reverse repo rate by 575 basis points from 9 per cent to 3.25 per cent in the last few months, he said. With these measures in place, the RBI expected a growth rate of 6 per cent for 2009-10 and WPI-(wholesale price index) based inflation to reach 4 per cent by March 2010, he said.
“It is true that the Indian economy is slowing and exports have declined, services sector is decelerating, investment demand is on the decline and corporate margins are dented. However, growth moderation is steeper than thought earlier. The cyclical downturn was natural after four years of high growth. But, a growth of 6 per cent is certain,” Subbarao said.
He added that India’s economic recovery would be swifter and sharper than any other economy. But he was also quick to add that for India to recover the world has to recover. The challenge before the country is to minimise the pain of adjustment.
“We are not a demand-constrained economy. Once confidence is restored, there will be a faster recovery. However, we are a supply-constrained economy. Investment in manufacturing, infrastructure and services sectors needs to increase,” the RBI governor added.
Subbarao also said that there were some challenges ahead for India on the path to revival too.
“We should support the drivers of aggregate demand, increase private investment, maintain credit flow and credit quality, restore fiscal consolidation, manage government programming and implement fiscal stimulus vigorously. There is indeed enough money in the system for private demand to pick up,” he said.
Further, he said there were some positive features, such as normally functioning financial markets, the decline in inflation, comfortable foreign exchange reserves, a robust rural demand and social safety, an automatic stabiliser, which point to revival.
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