In an effort to mobilise resources and unlock investment from land resources, the country’s largest realty player DLF has divested 49 per cent equity stake in eight large residential projects to private equity investors, including Merrill Lynch and others, to mop up Rs 1,675 crore.
Merrill Lynch has picked up 49 per cent equity in 7 residential projects in Chennai, Bangalore, Kochi and Indore for Rs 1,481 crore. In a separate transaction DLF diluted 49 per cent equity to Brahma Investments for Rs 194 crore in a middle-income housing project at Panchkula in Haryana.
“In line with the company’s policy to develop large areas under the middle-income group, we have decided to rope in strategic partners,” said Rajiv Singh, vice chairman of DLF Ltd. These projects are not engaged in building luxury apartments and the average price band of these flats would be between Rs 35 lakh and Rs 45 lakh, he added.
Under the agreement, besides the management control, DLF would also charge management fees to supervise the projects.
“The deal would help in creating shareholders values. Both transactions would help DLF unlock its investments in land resource and also increase the rate of return to shareholders,” Singh said.
Market watchers feel that since profit margins in middle income units were not as high as they were in the case of the luxury apartments, the deal would allow DLF to focus on the premium segment, besides insulating the company from the risk of price fluctuations. DLF is expected to build over 10,000 residential units over the next 7-8 years.