Realty major DLF plans to raise over Rs 3,000 crore through divestment or joint ventures in certain projects and will form two Real Estate Investment Trusts (REITs) next fiscal as part of its strategy to improve cash flow and reduce debt.
In its analyst presentation, India's largest realty firm DLF said it intends to keep the net debt of DevCo (development arm) range bound "through tactical divestments or JV's with strategic or financial investors of certain projects".
"Current value of deals in pipeline, at various stages of negotiations/due diligence/documentation exceeds Rs 3,000 crore," it added.
The company is in dialogue with few private equity players for part cash out in some marquee projects before launching in FY'16, the presentation said.
DLF's net debt has risen by nearly Rs 400 crore to Rs 20,336 crore as on December 31, 2014. The current attributable net debt to DevCo (development arm) is Rs 6,350 crore and to RentCo (rental business) is about Rs 14,000 crore.
While DLF wants to maintain the debt of DevCo range bound by raising private equity funds, the company plans to cut debt of RentCo through launch of REITs.
"With the REITs around the corner, form 2 REIT platforms to tactically monetize almost 30 million sq ft of commercial assets, thereby increasing cash flows and reducing debt," DLF said outlining the strategy.
It further said that one REIT platform would be for office and other for retail assets and is targeting "first filing within fiscal year 2016".
The company said it is in talks with both strategic and financial investors interested in partnering with DLF.
In September 2014, market regulator SEBI had notified norms for listing of new business trust structure REITs that would help attract more funds in a transparent manner into the realty sector.
By end of this fiscal, DLF is on target to achieve an annuity income of about Rs 2,400 crore on an asset base of 30 million sq ft.
"As REITs become an imminent possibility in the near term, the Board has appointed a Committee of Independent Directors to do a strategic review of the RentCo business so that best value is extracted from the investment assets that have been created over last 6-7 years".
The committee of independent directors have appointed two investment banks JP Morgan and Morgan Stanley to advise them of the best possible path going forward which will create sustainable, long term income for DLF and its shareholders.
