Stake sale seemed to be a right solution: Rajiv Singh
The Economic Times, May 15, 2009, Page 10
IT IS always a wrench to part with a slice of your company. But selling stake in DLF was the only pragmatic way forward, says DLF vice-chairman Rajiv Singh. In a chat with Sanjeev Choudhary and Chaitali Chakravarty, he explains why a stake sale was the ‘right’ solution, and what makes it a pretty good option for fixing India’s fiscal deficit, too. Excerpts:
Was it painful to decide to sell stake at a time when your share is trading at almost one-fifth of its peak?
Yes, it was (painful), but only up to a point. Dilution anyway could have taken place. But timing perhaps could have been better. It was a pragmatic decision. It was not that company was doing badly and making losses. There is no loss here. This only goes to strengthen the balance sheet of the company.
Do you think this was the best option before you to raise funds?
Best or worst nobody knows. Only history will judge it. But it seemed to us the right solution. We explored and continue to explore private equity as option and eventual listing as option for DAL. Private equity investors would have taken more time. They believe in their way of working and we believe in our company and its assets.
When did you seriously start considering a stake-sale? Did Unitech’s successful QIP too encourage you to think on these lines?
Bankers keep coming to us with ideas. But the idea started becoming real in the last few weeks. Unitech’s QIP certainly helped.
How much money do you expect to raise through asset sale and how do you plan to utilise that?
Hopefully, we will be able to raise Rs 10,000 crore in two-three years through asset sale, exit from certain businesses, and our strategic investments. We have a treasury portfolio with certain investments.
We can’t give you details on our investments at present as we are negotiating with potential buyers. We expect to raise Rs 5,500 crore this fiscal through asset sale. We will use the sale proceeds to repay our current debt of Rs 14,000 crore. Our forecast is we will halve our debt this year.
You will be selling your hotels. Do you plan to exit this segment entirely?
We will not exit the entire business. We would like to retain the Aman brand. But we will look at other hotel properties just as investment.
Is your joint venture with Hilton Hotels intact? Are You open to exiting the JV?
Hilton is with us. But we are reasonably open to all initiatives. Since our interest level had reduced in hotels, we and Hilton agreed that why should we stand in their way. We reworked the agreement and gave Hilton greater access to third parties.
Have you sold your properties in New Delhi’s Saket area?
For one hotel, we have reached an agreement with a buyer. But for the other, negotiations are still underway.
Is housing demand actually picking up?
Yes, it is. I’d say the worst is over. But I will still be sort of cautious and say recovery is four-to-five months away. But I think we will not see further price correction.
What do you think of the broader economic picture? Are we on the path to recovery?
There is a feeling across the board that the panic is over and customer confidence is back. Political uncertainly remains, but people are thinking beyond government formation. There is generally a revival across many industries. Everybody has taken the hard decision, taken inventory cut and now is trying to move ahead.
How important is it for companies which political combine comes to power?
Government policies have been fairly consistent. My opinion is that since mid-80s, all governments have been pro-development. Some-body increases or decreases the pace of initiative, but there is no major difference.
What can the next government do to stimulate the economy?
Most of the economy is not realising the benefits of lower interest rate because of high fiscal deficit or the potential deficit overhang. The government should be able to deal with it by monetising some its assets. We have sold stake. The government should also look at selling minor stakes. Sell some stake, get funding and life carries on. And if you hold back, you set yourself back by several years.
There is a talk of bringing back money stashed away in Swiss banks. A resolution should be passed unanimously in the next parliament in this regard after the elections. It could be a win-win idea. The government should come up with some scheme as it had done earlier and bring out bonds.
Anyway, everyone is afraid of keeping money in foreign banks these days! So if the government offers safety and some return on the money, the scheme should work. The number being discussed is so large that even if the government were to capture a portion of it, it will solve the short term problem of infrastructure funding in India.
The Economic Times, May 15, 2009, Page 10
IT IS always a wrench to part with a slice of your company. But selling stake in DLF was the only pragmatic way forward, says DLF vice-chairman Rajiv Singh. In a chat with Sanjeev Choudhary and Chaitali Chakravarty, he explains why a stake sale was the ‘right’ solution, and what makes it a pretty good option for fixing India’s fiscal deficit, too. Excerpts:
Was it painful to decide to sell stake at a time when your share is trading at almost one-fifth of its peak?
Yes, it was (painful), but only up to a point. Dilution anyway could have taken place. But timing perhaps could have been better. It was a pragmatic decision. It was not that company was doing badly and making losses. There is no loss here. This only goes to strengthen the balance sheet of the company.
Do you think this was the best option before you to raise funds?
Best or worst nobody knows. Only history will judge it. But it seemed to us the right solution. We explored and continue to explore private equity as option and eventual listing as option for DAL. Private equity investors would have taken more time. They believe in their way of working and we believe in our company and its assets.
When did you seriously start considering a stake-sale? Did Unitech’s successful QIP too encourage you to think on these lines?
Bankers keep coming to us with ideas. But the idea started becoming real in the last few weeks. Unitech’s QIP certainly helped.
How much money do you expect to raise through asset sale and how do you plan to utilise that?
Hopefully, we will be able to raise Rs 10,000 crore in two-three years through asset sale, exit from certain businesses, and our strategic investments. We have a treasury portfolio with certain investments.
We can’t give you details on our investments at present as we are negotiating with potential buyers. We expect to raise Rs 5,500 crore this fiscal through asset sale. We will use the sale proceeds to repay our current debt of Rs 14,000 crore. Our forecast is we will halve our debt this year.
You will be selling your hotels. Do you plan to exit this segment entirely?
We will not exit the entire business. We would like to retain the Aman brand. But we will look at other hotel properties just as investment.
Is your joint venture with Hilton Hotels intact? Are You open to exiting the JV?
Hilton is with us. But we are reasonably open to all initiatives. Since our interest level had reduced in hotels, we and Hilton agreed that why should we stand in their way. We reworked the agreement and gave Hilton greater access to third parties.
Have you sold your properties in New Delhi’s Saket area?
For one hotel, we have reached an agreement with a buyer. But for the other, negotiations are still underway.
Is housing demand actually picking up?
Yes, it is. I’d say the worst is over. But I will still be sort of cautious and say recovery is four-to-five months away. But I think we will not see further price correction.
What do you think of the broader economic picture? Are we on the path to recovery?
There is a feeling across the board that the panic is over and customer confidence is back. Political uncertainly remains, but people are thinking beyond government formation. There is generally a revival across many industries. Everybody has taken the hard decision, taken inventory cut and now is trying to move ahead.
How important is it for companies which political combine comes to power?
Government policies have been fairly consistent. My opinion is that since mid-80s, all governments have been pro-development. Some-body increases or decreases the pace of initiative, but there is no major difference.
What can the next government do to stimulate the economy?
Most of the economy is not realising the benefits of lower interest rate because of high fiscal deficit or the potential deficit overhang. The government should be able to deal with it by monetising some its assets. We have sold stake. The government should also look at selling minor stakes. Sell some stake, get funding and life carries on. And if you hold back, you set yourself back by several years.
There is a talk of bringing back money stashed away in Swiss banks. A resolution should be passed unanimously in the next parliament in this regard after the elections. It could be a win-win idea. The government should come up with some scheme as it had done earlier and bring out bonds.
Anyway, everyone is afraid of keeping money in foreign banks these days! So if the government offers safety and some return on the money, the scheme should work. The number being discussed is so large that even if the government were to capture a portion of it, it will solve the short term problem of infrastructure funding in India.
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