On Arm's integration DLF's debt rise to Rs 2200 cr

DLF, Real estate, DLF Cyber City, DLF Assets , DLF Stock CUES, DLF Stock in News,

Real estate company DLF's over all debt will go up by Rs 2,200 crore as a result of integration of its wholly-owned subsidiary DLF Cyber City Developers Ltd with Caraf Builders & Constructions (a KP Singh company that owns DLF Assets Ltd).

DLF Board has in-principle approved the integration, that will see DLF Ltd holding 60 per cent interest in the entity formed by consolidation of its own commercial property subsidiary and the property trust.

The remaining 40 per cent will be held by promoter Mr K P Singh and family.


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In effect, DAL will now be brought into DLF's fold through this integration. DLF plans to list the property trust in Singapore in 2010. DLF said that the integration will be a “net cashless transaction” but did not reveal either the enterprise valuation of the two entities involved or the modalities of the deal.

The move has evoked a mixed reaction from analysts.

A Mumbai-based analyst told Business Line that it is difficult to draw conclusions in absence of information such as valuation or cash position of the two entities involved.

The deal is expected to be closely scrutinised by shareholders of DLF and the market as it involves promoter entity transaction.

However, some feel that the integration resolves the long-standing issue of conflict of interest and related party transaction (DAL had been prime buyer of DLF's commercial property at one time).

“A committee of independent directors, assisted by a team of advisors had recommended the structure and the valuations to the DLF board for its consideration...It puts to rest the questions raised in the market from time to time on related party transactions between DLF and its' promoters.

“Also, it makes the overall corporate structure more robust," Mr Aashiesh Agarwaal, a real estate analyst with Edelweiss said

Addressing mediapersons here, DLF said that Caraf's debt position stands at Rs 700 crore and that of DAL at Rs 1,500 crore.

“This means a consolidated debt of Rs 2,200 crore. DLF's overall debt will go up by Rs 2,200 crore. But this is all lease rental discounting debt and hence there is no cash flow implication for DLF Ltd…It will get paid off from the lease rentals,” DLF Executive Director (Finance) Mr Saurabh Chawla said.