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It is always a wrench to part with a slice of your company. But selling a stake in DLF was the only pragmatic way forward, says DLF vice-chairman Rajiv Singh. In a chat with Sanjeev Choudhary & Chaitali Chakravarty, he explains why a stake sale was the 'right' solution, and what makes it a pretty good option for fixing India's fiscal deficit, too. Excerpts:
Was it painful to decide to sell stake at a time when your share is trading at almost one-fifth of its peak?
Yes, it was (painful), but only up to a point. Dilution anyway could have taken place. But timing perhaps could have been better. It was a pragmatic decision. It was not that the company was doing badly and making losses. There is no loss here. This is only going to strengthen the balance sheet of the company.
Do you think this was the best option before you to raise funds?
Best or worst, nobody knows. But it seemed to us the right solution. We explored and continue to explore private equity as an option, and eventual listing as an option for DAL. PE investors would have taken more time. They believe in their way of working and we believe in our company and its assets.
When did you start considering a stake sale? Did Unitech's successful QIP, too, encourage you to think on these lines?
Bankers keep coming to us with ideas. But the idea started becoming real in the past few weeks. Unitech's QIP also helped.
How much money do you expect to raise through asset sale and how do you plan to utilise that?
Hopefully, we will be able to raise Rs 10,000 crore in two-three years through asset sale, exit from certain businesses, and our strategic investments. We have a treasury portfolio with certain investments. We can't give you details on our investments at present, as we are negotiating with potential buyers. We expect to raise Rs 5,500 crore this fiscal via asset sale. We will use the proceeds to repay our debt of Rs 14,000 crore. Our forecast is that we will halve our debt this year.
You will be selling hotels. Do you plan to exit the segment entirely?
We will not exit the entire business. We would like to retain the Aman brand. But we will look at other hotel properties just as an investment.
Is your JV with Hilton Hotels intact? Are you open to exiting the JV?
Hilton is with us. But we are reasonably open to all initiatives. Since our interest level had reduced in hotels, we have reworked the agreement and gave Hilton greater access to third parties.
Have you sold your properties in New Delhi's Saket?
For one hotel, we have reached an agreement with a potential buyer. But for the other one, negotiations are still underway.
Is housing demand actually picking up?
Yes, it is. I'd say the worst is over. But I will say recovery is four-to-five months away. But I think we will not see further price correction.
What is your view on the broader economy? Are we on the path to recovery?
There is a feeling across the board that the panic is over and customer confidence is back. Though the political uncertainly remains, people are thinking beyond the government formation. There is generally a revival across many industries.
How important is it for companies which political combine comes to power?
The government policies have been fairly consistent. My opinion is that since mid-80s, all governments have been pro-development. Somebody increases or decreases the pace of initiative, but there is no major difference.
What can the next government do to stimulate the economy?
Most of the economy is not realising the benefits of lower interest rate because of high fiscal deficit or the potential deficit overhang. The government should be able to deal with it by monetising some its assets. It should also look at selling minor stakes. Sell some stake, get funding and life carries on. And if you hold back, you set yourself back by several years. There is a talk of bringing back money stashed away in Swiss banks. A resolution should be passed unanimously in Parliament in this regard after the elections. It could be a win-win idea. The government should come up with some scheme, as it had done earlier and bring out bonds.
Was it painful to decide to sell stake at a time when your share is trading at almost one-fifth of its peak?
Yes, it was (painful), but only up to a point. Dilution anyway could have taken place. But timing perhaps could have been better. It was a pragmatic decision. It was not that the company was doing badly and making losses. There is no loss here. This is only going to strengthen the balance sheet of the company.
Do you think this was the best option before you to raise funds?
Best or worst, nobody knows. But it seemed to us the right solution. We explored and continue to explore private equity as an option, and eventual listing as an option for DAL. PE investors would have taken more time. They believe in their way of working and we believe in our company and its assets.
When did you start considering a stake sale? Did Unitech's successful QIP, too, encourage you to think on these lines?
Bankers keep coming to us with ideas. But the idea started becoming real in the past few weeks. Unitech's QIP also helped.
How much money do you expect to raise through asset sale and how do you plan to utilise that?
Hopefully, we will be able to raise Rs 10,000 crore in two-three years through asset sale, exit from certain businesses, and our strategic investments. We have a treasury portfolio with certain investments. We can't give you details on our investments at present, as we are negotiating with potential buyers. We expect to raise Rs 5,500 crore this fiscal via asset sale. We will use the proceeds to repay our debt of Rs 14,000 crore. Our forecast is that we will halve our debt this year.
You will be selling hotels. Do you plan to exit the segment entirely?
We will not exit the entire business. We would like to retain the Aman brand. But we will look at other hotel properties just as an investment.
Is your JV with Hilton Hotels intact? Are you open to exiting the JV?
Hilton is with us. But we are reasonably open to all initiatives. Since our interest level had reduced in hotels, we have reworked the agreement and gave Hilton greater access to third parties.
Have you sold your properties in New Delhi's Saket?
For one hotel, we have reached an agreement with a potential buyer. But for the other one, negotiations are still underway.
Is housing demand actually picking up?
Yes, it is. I'd say the worst is over. But I will say recovery is four-to-five months away. But I think we will not see further price correction.
What is your view on the broader economy? Are we on the path to recovery?
There is a feeling across the board that the panic is over and customer confidence is back. Though the political uncertainly remains, people are thinking beyond the government formation. There is generally a revival across many industries.
How important is it for companies which political combine comes to power?
The government policies have been fairly consistent. My opinion is that since mid-80s, all governments have been pro-development. Somebody increases or decreases the pace of initiative, but there is no major difference.
What can the next government do to stimulate the economy?
Most of the economy is not realising the benefits of lower interest rate because of high fiscal deficit or the potential deficit overhang. The government should be able to deal with it by monetising some its assets. It should also look at selling minor stakes. Sell some stake, get funding and life carries on. And if you hold back, you set yourself back by several years. There is a talk of bringing back money stashed away in Swiss banks. A resolution should be passed unanimously in Parliament in this regard after the elections. It could be a win-win idea. The government should come up with some scheme, as it had done earlier and bring out bonds.
Rajiv Singh, vice-chairman, DLF
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