DLF to divest its wind power biz

DLF to divest its wind power biz
Business Standard, March 31, 2009, Page 6

Arun Kumar / New Delhi

Had invested around Rs 1,500 crore in the business; may exit at Rs 1,100 crore.

India’s largest real estate developer, DLF Ltd, has decided to divest its windmill power generation business, which it says is non-core. Sources in the company said the management had decided to put the business on the block to raise resources for a more related business. The company has an installed capacity of around 260 Mw.

Sources said after concluding the acquisition of DLF Asset Ltd, a group company owned by DLF promoters’, KP Singh and family, they would start working on divesting the power generation business.

Rajeev Talwar, group executive director, DLF Ltd, refused comment.

The company had invested around Rs 1,500 crore in the business. After taking a depreciation claim of a significant amount, the company is looking at exiting at around Rs 1,100 crore, according to sources close to the development. The company had serious discussions with some private equity players, but there was no deal due to differences over valuation, they added.

The cost of setting up a windmill power plant is Rs 5-6 crore per Mw as against Rs 4-4.5 crore in case of a thermal power plant. Since the company is allowed to take a huge depreciation claim, the profit-making company will save a significant amount on tax obligation.

Another senior official said the company was in the midst of restructuring its businesses, which included buying DLF Asset Ltd. The company would continue to take steps to ensure better returns for shareholders, he added.

Power generation was not a core-business, the official said, adding that in the current environment, it was difficult to invest more in it. Without disclosing the size of the proposed transaction, the official said, “It depends on the offer price for such assets.”

DLF is in an advanced stage of concluding the acquisition of DLF Asset Ltd. According to indications, the company was hopeful of an announcement in the first week of April, the source said. A detailed due diligence by bankers and others is under progress. “Since the valuation of DLF Asset Ltd has come down marginally, investment bankers and legal experts are engaged in structuring the transaction so that the investors in DLF do not lose,” said a source.