As part of its strategy to sell non-core assets to cut its debt, realty giant DLF plans to offload stake in most of its wind energy business in the next one week or so in a deal valued at around Rs 600-700 crore, CNBC-TV18 reported today.
In July, the company's investors had approved selling DLF's wind energy business. As on September 30, DLF's net debt stood at Rs 23,220 crore. However, after it sold the Mumbai National Textile Corporation (NTC) land to Lodha Group, the company said its debt fell to Rs 21,220 crore.
According to the CNBC-TV18 report, DLF is on track to sell its entire wind energy business by financial year 2013 for close to Rs 900 crore. The proceeds will be used to retire a part of its debt.
DLF will sell the wind energy business in Gujarat and Karnataka in phase one to former GE India's head TP Chopra's Bharat Light & Power.
During the second phase, DLF will sell remaining wind assets in Rajasthan and Tamil Nadu for approximately Rs 200 crore by next year.
Meanwhile, DLF expects to complete the sale of its Aman Resorts luxury hotel chain by the end of December. The Aman Resorts assets for sale include 22 hotels in 12 countries, but not the property in New Delhi. According to a report in the Business Standard, Aman Resorts is being sold to a US-based investment company for $325 million (Rs 1,800 crore).
DLF has been trying to sell this hotel chain for over a year now but the deal had stalled due to lower-than-expected bids from shortlisted companies. This both together will get company around another Rs 2,700 crore.
DLF expects to close the financial year with a realisation of Rs 5,000 crore from divestment.
Timely sale of these non-core assets is critical for DLF's performance, which needs to be complemented with new launches. However, most of the launches are skewed towards the latter half of the year.
BofA-ML in its latest report of 'Fallen Angels' has also identified DLF has a stock awaiting triggers for an upside. "Strong operational performance will drive stock price as the company accelerates new residential project launches. A trigger would be reduction in debt as the company sells non-core assets like Aman properties," it said in the report.
While new launches is a significant business strategy to spruce up its balance sheet, absorption numbers in Delhi and Gurgaon (DLF's strongholds) tell a different story.
"The new sectors of south Gurgaon (Sec 58 to 75 & 79 excluding 74 A& 75A), have seen a drop in absorption by 47% year to year. Likewise, in new Gurgaon (excluding NH-8 Manesar), the drop in absorption has been 31% year to year," Samir Jasuja, CEO, PropEquity, is quoted as saying in a Times of India report.
Given that absorption rates have fallen significantly despite a slew of launches by various companies, it remains to be seen if DLF will be able to revive its business model.