DLF forms team to weigh non-core asset sale

DLF, the largest real estate company has, with the aim of cutting its big debt load, recently set up a core team of five to six people to focus on the process of sale of non-core assets, a company official said.

DLF is targeting to raise Rs 5,000-6,000 crore this financial year from the sale of non-core assets. In 2011-12, it had managed to raise around Rs 1,620 crore from non-core divestments as of December 2011 and in 2010-11, around Rs 1,110 crore. The company had set a medium-term goal of raising Rs 7,500 crore, of which Rs 6,000 crore could be raised by March 2013, according to the latest presentation to analysts.

As of December 2011, it had debt of Rs 22,758 crore. The debt-equity ratio of 0.8:1 compares reasonably well with most healthy companies, chief financial officer Ashok Tyagi had told Business Standard earlier.

The dedicated team for disinvesting non-core assets, with key representatives from finance, was formed so that the core business of DLF could progress without any obstacles, an official said. The idea is to be be able to concentrate on project execution, deliveries and cash flows, while not losing sight of the debt reduction goal.

"This shows the company's intention to fast-track the divestment of non-core assets,” said Anubhav Gupta, analyst, Kim Eng Securities. “However, whether the market is ready to accept the assets on the block in a different thing.”

The company may have to lower its realisation expectations to sell, added another analyst.

The company refers to its hospitality business, mainly the Aman hotel chain, the wind power business and Mumbai land as non-core assets. It has been in serious talks with potential buyers for the sale of Aman hotels, excluding the Delhi property, for more than a year. Valuation of the asset is learnt to have come in the way. DLF is expecting to generate at least Rs 2,000 crore from the sale of its hospitality business. Citi group and Goldman Sachs are advisors for the Aman deal.

For the NTC Mill land in Mumbai, the company is believed to be looking at raising Rs 2,000 crore. The company is getting both international and domestic bids for this land, it is believed. Sale of its wind power generation business is expected to generate Rs 1,000 crore.

Source : BS