DLF in talks with banks, LIC to raise funds

DLF in talks with banks, LIC to raise funds
The Financial Express, Corporates & Markets, February 21, 2009, Page I

Kakoly Chatterjee, New Delhi

The country’s largest real estate firm, DLF Ltd is in talks with Punjab National Bank, State Bank of India, Oriental Bank of Commerce and Life Insurance Corporation to raise Rs 1,000 crore to pay off its short-term debt. The company is likely to get the loan at the rate of 13-14%.

The short-term debt that DLF would be retiring from the new loan was for a period of 12 months at the rate of 11%. The new, long-term debt would be for a longer tenure.

DLF needs to repay around Rs 2,000 crore of debt by March 2009. During the October-December quarter, DLF replaced Rs 1,000 crore of short-term debt. The company had earlier announced that it plans to replace its short-term debt of Rs 4,000 crore that is going to mature in the latter part of the year with long-term debt.

At a time when demand has plunged in all segments of the realty sector, DLF is in the process of restructuring its debt, like most other realty companies. Currently, DLF has a net debt of around Rs 13,000 crore on its books.

It is also looking at raising Rs 2,000 crore by selling non-strategic assets, such as its power business and the land that was to be used for retail and commercial projects over the next few quarters.

Additionally, it plans to raise around Rs 2,500 crore in DLF Assets Ltd (DAL), owned by its promoters, by selling stakes to private equity investors. DAL was established to buy and hold completed commercial assets of the listed developer. DAL owes around Rs 5,500 crore to DLF for the assets that it has bought from the parent company.

DLF reported a 68.72% decline in net profit at Rs 670.79 crore for the third quarter ended December compared to Rs 2,144.98 crore in the corresponding period last year. The company’s revenue was down by 39.42% to Rs 673.46 crore during the quarter compared with Rs 1,111.85 crore during the corresponding quarter a year ago.

On an overall basis, realty companies have been hit really hard by the downturn. The sector’s stocks have experienced immense value erosion, with shrinking toplines and bottomlines. While toplines have declined from 60% to 70% on an annual basis, bottomlines have declined by 60% to 95% on most occasions.

Land mine
• Likely to get loan at the rate of 13-14%
• The new, long-term debt to be for a longer tenure
• Needs to repay around Rs 2,000 cr by Mar 09
• DLF has a net debt of around Rs 13,000 cr