DLF Likely to Rejig Business Model

DLF, India's largest real estate company, might go for a new business model, under which it will build and complete residential projects before selling units. The company may go ahead with this plan after promoters K P Singh and his family completes the sale of their 40 per cent stake in the company's rental arm, DLF Cyber City Developers, to institutional investors for Rs 12,000-14,000 crore goes through, The Economic Times reported.

Quoting people close to the developments, the report said the company's development arm would look into the new business model. Initially, it will do this for already launched projects; the same strategy could be applied to new launches. Global players like GIC, Blackstone, Abu Dhabi Investment Authority (ADIA) , Qatar Investment Authority (QIA) and Canada Pension Plan Investment Board (CPPIB) have shown interest in the plan, the report added.

However, the new strategy might add more stress to DLF's balance sheet and it will have to take on debt again to develop these properties. In its already launched projects, DLF has an unsold apartment inventory of around Rs 15,000 crore.

The development comes days after reports said DLF's promoters would reinvest a significant part of the amount raised through the sale of the rental arm into DLF to cut the rising debt. As of now, promoter stake in DLF stands at 75 per cent. The rental business accounts for annual income of about Rs 2,400 crore.

Bloomberg data showed as of March, the net consolidated debt of DLF was Rs.21,600 crore, with operating cash flows insufficient to service and cut debt.