Court to let DLF sell fund investments, providing relief

By Himank Sharma and Aditi Shah

MUMBAI (Reuters) - An appeals court on Thursday paved the way for DLF, the country's biggest property developer, to sell its mutual fund investments, providing relief to a debt-laden firm reeling after regulators stopped it tapping capital markets for three years.

The three-member Securities Appellate Tribunal (SAT) asked DLF to submit an affidavit by Monday stating the amount it wished to redeem in mutual fund investments. In its appeal document, DLF said it had more than 20 billion rupees ($325 million) invested in these funds.

The tribunal said it would examine the request for redemptions and give approval next week, if there was no objection from the markets watchdog, the Securities and Exchange Board of India (SEBI).

 

Redemptions could help sustain the company's cash flow until Dec. 31, Chief Financial Officer Ashok Tyagi told Reuters after the hearing, without specifying how much the company might raise.

However, the SAT has yet to give a final ruling on DLF's appeal against SEBI's ruling on Oct. 13 barring the developer and its executives from capital markets for three years because of suspected violations in its 2007 listing disclosure.

The SAT said it would hold its next hearing on Dec. 10. DLF is requesting temporary access to equity and debt capital markets while the appeals process continues.

"They (DLF) will still need to accelerate their asset sale programme. They are hardly generating any cash, and their cash-flow shortfall is so large that they will have to resort to large-scale asset sales if there is no interim relief on fund raising," said Anubhav Gupta, sector analyst at Maybank Kim Eng India.

As part of the appeals process, the tribunal also needs to decide if the company would be allowed to raise 50 billion rupees in non-convertible debt.

DLF has argued SEBI's ruling should not apply to this fund-raising, since it was approved by its board prior to the regulator's ban.

The developer has $3.6 billion in debt and may be forced to sell assets - even unfinished projects - to meet debt obligations if it loses the appeal or if the process drags on, bankers and analysts have said.

DLF's cash to short-term debt ratio was 0.32 at end-March, Thomson Reuters data showed, which suggests its cash is not sufficient to repay debt maturing within a year.

    The developer had free cash flow of 5.18 billion rupees for the fiscal year ended March 31, the lowest in four years, Thomson Reuters data showed.

($1 = 61.4475 rupees)

(Editing by Rafael Nam and Alan Raybould)