Capital infusion to lower DLF’s debt
Realty major DLF’s plan to infuse capital into the company through convertible warrants, followed by a qualified institutional placement (QIP), will reduce its debt by more than half. The company has called an Extraordinary General Meeting to conclude the transaction at the end of the month.
In a statement issued on December 1, DLF said its promoter group will infuse Rs 11,250 crore through warrants and convertible debentures at Rs 217.25 per share.
Analysts said the company may go for a QIP of about Rs 2,700 crore to ensure the promoter holding does not exceed 75 per cent, thus infusing about Rs 15,000 crore in total into the company. They expect the QIP price to be at similar levels. At the end of September, the net debt on DLF’s balance sheet was Rs 23,750 crore. After the capital infusion, the debt-equity ratio will fall from one to 0.4.
DLF’s shares have risen by a quarter in the last three months. On Tuesday, they touched an intra-day high of Rs 239.55. With the capital infusion, investor interest may continue to remain high as this would improve the developer’s scope to increase commercial assets. The company has reported strong cash flows from its commercial assets even in weak times. As a result, analysts have assigned a high value of Rs 110 per share to DLF’s commercial business.
While lower debt will ensure lower cash outflows, growth will come if there is recovery in the residential business, which has been a weak link for some years now. DLF’s net profit in the September quarter fell by 90 per cent to Rs 23 crore and was 80 per cent below expectation due to weak revenue recognition.