DLF Universal is set to go public at one of the tumultuous times in the history of the Indian stock markets. Even as the Sensex yo-yos between the 10,000 and 12,000 mark, the entire financial community is eagerly awaiting the biggest IPO ever that is expected to gross over Rs 13,500 crore (Rs 135 billion).
In a free wheeling chat with Bhupesh Bhandari & Nayantara Rai, Rajiv Singh, vice-chairman, DLF Universal, deconstructs the group's business model.
DLF is involved in a lot of litigation. Why is that?
For a real estate company of our size, we are not involved in that much litigation. In some cases, we make commercial settlements, in others we tender an apology when necessary. Sometimes, we prefer to not make settlement as we do not want to set a precedent for others.
How is DLF Power doing?
It is doing well physically, but not financially. Our clients do not want to pay us. Anyway, the matter is under sub judice.
Are you looking to exit from DLF Power?
Infrastructure is now part of our core business and power is integrated in our projects. At a later stage, we may look at exiting from DLF Power. However, if it starts doing well financially, we may change our minds.
You are changing your business model based on leasing commercial properties. How will this work?
If an independent valuation determines that the property is valued at less than 10 times the expected annual rental and maintenance income, then one of our affiliated companies, DLF Assets, might be required to purchase the property at the higher price.
Alternatively, DLF Universal could exercise the option of selling the property based on a competitive bidding process, with DLF Assets having the right to match the highest bid.
Will you sell your current commercial buildings?
Our model currently is based on long-term lease. Even if we choose to divest our current buildings, we will retain management. We will retain management even in our new buildings.
Will you list DLF Assets on the stock exchange?
Not now. With the upcoming initial public offering, I don't want to commit to anything right now. In the future, we may look at listing DLF Assets.
DLF Universal is highly exposed to debt.
Our debt in secured and unsecured loans amounts to Rs 4,132 crore (Rs 41.32 billion). We intend to prepay up to Rs 4,000 crore (Rs 40 billion) of our outstanding debt from the net proceeds of the IPO.
Will DLF remain as the main brand of the company?
DLF will always be our mother brand. However, we are developing a series of brands that will be applicable throughout the country.
There will then be one name for one particular segment of housing across all cities. There could even be a tag line such as 'Homes from DLF'.
We will have to be cautious as people might object to being standardised with a brand of a particular housing income.
Are you considering acquisitions of other real estate companies?
Instead of looking at just real estate companies, we will consider acquisitions from those companies, which have real estate assets.
For instance, we recently bought approximately 30 acres from SIEL in New Delhi. We will use this land to develop the much needed IT Park in the city.
There has been some talk of Reliance taking anchor stores in your malls.
We see Reliance as a powerful tool. In this line, discussions continue with everyone. We already have an arrangement with Trent. Reliance will be a welcome addition.
Do you foresee IT companies relocating from IT Parks to special economic zones?
No, I don't foresee a wholesale shift. I think the companies might expand into SEZs.
What about your foray into hotels?
We are looking at all hotel segments-super luxury, four star, budget, business hotels and even service apartments.
We are in talks with several international hotel chains for managing our properties. Each segment will be managed by a different hotel chain.