The promoters of DLF Ltd on Wednesday sold 9.9 per cent stake in the company to institutional investors, for a consideration of Rs 3,860 crore. Capital International Fund has bought the largest chunk of the shares, while other investors are HSBC, Fidelity and T Rowe Price, sources said adding that almost 95 per cent of the shares were bought by less than 10 institutional investors.
The bulk deal data on the BSE lists out Deutsche Securities Mauritius, Euro Pacific Growth Fund, Copthall Mauritius Investment, and Capital Research Management as being some of the front-end buyers. “Some of them may have bought the shares on behalf of key FIIs or funds,” sources said.
Following the open market transaction on Wednesday, the promoter group now holds 78.6 per cent stake in DLF. The stake sale by DLF promoters in the company is aimed at lending a helping hand to the cash-strapped DLF Assets Ltd (DAL).
In all, the DLF founders including Mr K.P. Singh and family, and his several investment companies sold 168 million shares at just above Rs 230 a share. The transaction was at 2.6 per cent discount to the closing price of DLF shares in the previous trading session. However, the price per share is half of the price that DLF had managed when it went for an IPO in mid-2007 (Rs 525 a share).
After the deal was announced, the DLF shares on BSE touched a high of Rs 254.90 but could not sustain the gains due to the general market weakness. It ended 1.6 per cent lower at Rs 232.50 a share against the previous close of Rs 236.25.
Utilisation of proceeds
A DLF statement said that promoters plan to infuse the funds into DAL. While the company did not provide a break-up, a source said as much as Rs 2,000 crore is likely to be utilised for buying out DE Shaw’s interest in DAL; another Rs 1,860 crore would be injected directly into DAL which, in turn, will use the proceeds to pay DLF towards its “contractual obligations”.
Privately-held DLF Assets Ltd – also promoted by Mr K.P. Singh – buys commercial real estate from DLF at market price and then leases it out. DAL had been buying assets from DLF in the past, but the realty firm has lately suspended sales to DAL since Q3 FY09.
Sources, however, said that as a company DLF still continues to explore the possibility of acquiring a direct stake in DAL, for which a committee of independent directors is evaluating various options. “That is a part of a larger strategy to give the benefit of DAL listing as and when it happens, to DLF shareholders,” the source said.
Market analysts that Business Line spoke to said the transaction is “positive” for the company.
“I understand that promoters will infuse money into DAL which will go towards paying-off DLF (DLF’s receivables from DAL is pegged at Rs 4,900 crore). All in all, it will improve the cash position of DLF. Also, as DAL could not go for listing, its old investor DE Shaw may have been eyeing an exit option; the deal now makes that exit possible,” Mr Shailesh Kanani, real estate and infrastructure analyst at Angel Broking, pointed out.
Last month, DLF’s smaller rival Unitech Ltd received a strong response to its Qualified Institutional Placement (QIP) issue – it raised nearly $325 million (over Rs 1,620 crore) by selling fresh shares to institutional investors.
Source: The Hindu Businessline