DLF eyes better cash flow after merging asset arm

DLF eyes better cash flow after merging asset arm
Hindustan Times, December 17, 2009, Page 25

HT Correspondent, New Delhi

Realty major DLF has kicked in the corporate restructuring plan. Its board of directors has approved the integration of promoter held company Caraf Builders & Constructions with DLF Cyber City Developers—a subsidiary company of DLF. Caraf Builders is the holding company for DAL (DLF Assets Ltd), which buys out commercial property from DLF and in turn leases them out.

DLF’s board had constituted a special committee of independent directors to examine the possibility of integration of rental business held both by the company and its promoters. The integration of rental business is aimed to eliminate conflicts of interest and achieve management integration, the company said in a filing to the Bombay Stock Exchange.

Post-merger the promoters, which include KP Singh and his family members, will hold 40 per cent in Caraf Builders while the remaining 60 per cent would be owned by DLF. The company did not assign any value to the deal that has been termed as ‘cashless transaction’.

The in-principle approval by the DLF’s board is subject to necessary corporate and regulatory approvals to be implemented in due course of time. Kotak Mahindra Capital and Enam Securities were the transaction advisors and independent valuers to the special committee. BMR & Associates and KPMG were the tax advisors.

The realtor said that consolidation of the groups’ rental assets under the holding company, DLF, would enhance stable rental incomes and cash flows. “It would also eliminate the perceived conflict of interest between the promoters & DLF and will facilitate management integration,” the company said.

“The merger is expected to pave way for listing of DAL at the Singapore Stock Exchange during the next financial year,” a senior DLF executive said on conditions of anonymity. He, however, refused to provide details of the extent of stake dilution in DAL.