DLF's rental arm raises Rs 2,400 cr from SBI to fund future expansion plans

Realty major DLF's rental arm DCCDL has raised Rs 2,400 crore debt from India's largest lender SBI to refinance its existing debt and fund future expansion plans, a senior company official said.

In an interview with PTI, DLF's group chief financial officer (CFO) Vivek Anand said the debt has been raised at a very attractive interest rate of 7.35 per cent, enabling the company to reduce interest cost.

DLF Cyber City Developers Ltd (DCCDL), the joint venture between DLF and Singapore sovereign fund GIC, has 33 million sq ft of office and retail properties generating an annual rental income of Rs 3,500 crore. DLF holds 66.66 per cent stake in DCCDL while GIC has the rest.

"DCCDL has secured funding of Rs 2,400 crore from India's largest public sector bank SBI. It sets a benchmark for lease rental discounting (LRD) in the country," Anand told PTI.

The fund has been raised through the LRD route against a rental portfolio of 2.4 million sq ft area in Cyber City, Gurugram.

"It is one of the biggest disbursements by any public sector bank during the COVID-19 pandemic. This also clearly demonstrates our strong tenant profile and ability to generate cash for a long-term period," said Anand, who joined the company last year.

Asked about utilisation of funds, Anand who is a chartered accountant by profession with 25 years of experience across businesses, said DCCDL has refinanced its existing debt worth Rs 1,950 crore while Rs 450 crore will be used for future expansion.

At present, DCCDL has a debt of around Rs 19,500 crore.

"In the short to medium term, the debt of DCCDL will remain at Rs 20,000 crore level because of our plan to expand portfolio," Anand said.

He noted that the company has chalked out a plan to develop 18 million sq ft of commercial assets, of which 4 million sq ft is already under construction in Chennai and Gurugram.

Talking about the operational performance of the rental business during this pandemic, Anand said the DCCDL's rental collections and occupancy level were robust at over 95 per cent during the first half of this fiscal and the outlook remains positive.

He said the company has not reduced rental of leased office space, but rents have been deferred in few cases.

Referring to retail real estate segment, Anand said the shopping malls business has been impacted due to the outbreak COVID-19 and subsequent lockdown during April-May.

He said footfalls in its malls, which were allowed to open from June, have reached 50-60 per cent of the pre-COVID-19 level.

With multiplexes opening and ease of curb in food and beverages (F&B) segment, he hoped that footfall would gradually increase.

However, Anand highlighted some positive trends in retail space like conversion rates being higher with only serious buyers visiting shopping malls and international brands doing better due to restrictions in overseas travel.

The group CFO said the DCCDL is going ahead with its expansion of office portfolio, and the construction work is being undertaken at ongoing projects in Chennai and Gurugram.

Anand said the company's rental income will rise further as rent from its Cyber Park project has started accruing from this month. This 2.5 million sq ft project will help it earn Rs 350 crore annually.

DLF had formed a joint venture with GIC in December 2017 after its promoters sold their entire 40 per cent stake in the DCCDL for nearly Rs 12,000 crore.

This deal included sale of 33.34 per cent stake in DCCDL to GIC for about Rs 9,000 crore and buyback of remaining shares worth about Rs 3,000 crore by the DCCDL.