DLF to review partnership with assets arm

In the wake of the global slowdown hitting the commercial leasing segment, real estate giant DLF is reviewing its strategic relationship with group firm DLF Assets Limited (DAL).

In the wake of the global slowdown hitting the commercial leasing segment, real estate giant DLF is reviewing its strategic relationship with group firm DLF Assets Limited (DAL). DLF’s Board of Directors have set a committee of independent directors who have further appointed a set of advisors and a recommendation is expected by quarter ended June 30.

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DLF sells constructed property to DAL, which leases the space out to earn rental incomes. Revenues from DAL dropped to Rs 322 crore during the quarter ended March 31, 2009, down by 82 per cent from Rs 1,845 crore it generated during the year ago period.

DAL owed more than Rs 5,000 crore to DLF of which it has so far paid only Rs 800 crore raised from discounting of lease rentals.

“Due to the impact of global slowdown on commercial leasing, the board of directors of DLF Ltd deemed it fit to review the strategic relationship with DAL,” DLF said in a statement.

“DAL’s shareholders are currently evaluating further financing options which include additional LRD (lease rental discounting), private equity and further infusions from DAL shareholders,” Rajiv Singh, vice-chairman, DLF, said in a statement.

Analysts tracking the sector said that DLF could consider buying out a 40-45 per cent stake in the company or else consider a reverse merger option. UBS Investment Research in a report published earlier this year had mentioned the possibility of DLF buying a stake in DAL. “DLF might acquire a 40-45 per cent stake in DAL,” said an analyst at a leading multinational research firm who did not wish to be identified.

DLF said in a statement that it had stopped further sales to DAL during the last quarter.