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DLF arm buys out PE stake in group firm for Rs 3,085 cr

Real estate company DLF Ltd said on Saturday that its subsidiary, Caraf Builders & Constructions Pvt Ltd, acquired 24.52 crore compulsorily convertible preference shares (CCPS) in group company DLF Assets from PE firm SC Asia for Rs 3,084.68 crore.
The company said the move is in line with its strategy of consolidating shareholding of DAL, a co-developer for four IT/ITES SEZs based in Gurgaon, Chennai and Hyderabad.
With this, Caraf's stake in DLF Assets has risen to 91.90 per cent. DSIPL (a company owned by SC Asia) would continue to hold 2.72 crore CCPS, representing an economic interest of 4.59 per cent in DAL.
The balance 3.5 per cent is held by DE Shaw. Sources said that before the deal, SC Asia's stake in DAL was 45-50 per cent.
“As on December 2009, DLF had about Rs 2,700 crore cash on its books. We had surplus cash and have used it to purchase equity. Post the consolidation, DLF will have a substantial annuity and rental business. For instance, this year, we expect Rs 1,500 crore of rental business,” the DLF Executive Director (Finance), Mr Saurabh Chawla, told Business Line.
To another query, Mr Chawla clarified that SC Asia is an independent PE fund, and not linked to DLF or its promoters.
“The transaction is helping us create the largest rent-yielding company. At some point when we look at monetising it through DAL listing, the DLF shareholders will benefit,” he said.
On Friday, the DLF stock ended up 1.78 per cent at Rs 331.35.

In December 2009, the DLF board had approved the integration of its wholly-owned subsidiary DLF Cyber City Developers Ltd (DCCDL) with Caraf Builders & Constructions (a K.P. Singh company that then owned DLF Assets Ltd).
DLF had stated that post-integration, it would hold 60 per cent interest in the consolidated entity, and 40 per cent will be with DLF promoter Mr K P Singh and family.
The integration announced in December was aimed at resolving the perceived conflict of interest between DAL and DLF, a concern that had been flagged by analysts time and again as DAL was the prime buyer of DLF's commercial property at one time.
According to the integration blueprint, DCCDL would emerge as the Group's flagship company for holding rental assets – retail, utilities and support, IT Park and DAL (held under independent companies).

In a presentation to analysts in December, DLF had said that DAL had CCPS outstanding towards SC Asia, which had infused Rs 2,725 crore. It has also disclosed that Caraf's economic ownership in DAL on a fully diluted basis is expected to be 96 per cent once the entire outstanding CCPS are acquired.

Source: Business Line

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