DE Shaw to retain $100-m investment in DLF Assets

DE Shaw to retain $100-m investment in DLF Assets
The Financial Express, August 4, 2009, Page 2

fe Bureaus, New Delhi

Private equity fund D E Shaw is only partially exiting the KP Singh promoted company DLF Assets Ltd (DAL). It will retain around $100 million of the $400 million it had invested in DAL two years ago.

Rajiv Singh, vice-chairman, DLF, told an analyst conference recently that the company would shortly convey the outcome of the ongoing talks between the promoters of DLF and DE Shaw, which was showing an interest in maintaining its stake in DAL.

While D E Shaw refused to comment on its exit from DAL, DLF said these are large and complicated transactions which take a lot of time and the details will not be known until the deal is done.

It is believed that DE Shaw’s partial exit will be based on fair market value, however it is yet to receive Reserve Bank of India (RBI) approval for the exit.

In May this year, the promoters had sold 9.9% of their stake in DLF to raise Rs 3,800 crore, of which Rs 2,200-2,400 crore was to be used to buy out DE Shaw’s investment.

DAL had promised D E Shaw a fixed put option price. The details of the contract between D E Shaw and DAL is however not known. Standard Chartered Bank is believed to be the authorised banker for the DAL-DE Shaw deal and it is working on Foreign Exchange Management Act (FEMA) compliance issues.

In 2007, DE Shaw had invested $400 million in DAL and it also holds compulsory convertible preference shares (CCPS) of DAL with a fixed put option price. The RBI had said that CCPS with fixed put option price was not FEMA compliant.

DLF Ltd’s receivables from DAL now stand at Rs 2,600 crore, compared with Rs 4,906 crore as on March 31, 2009. The company received Rs 2,500 crore from DAL in the first quarter of FY10, exceeding the target of Rs 2,000 crore. DLF expects another Rs 500 crore from DAL during the fiscal. DLF is focusing on de-leveraging and the company’s net debt stands at Rs 11,686 crore, compared with an opening net debt of Rs 13,958 crore at Q1FY10.