SEBI bars DLF, KP Singh & five top executives from entering securities markets for 3 years

ET Bureau | 14 Oct, 2014, 04.00AM IST 

t  India's largest builder DLF, which has been in the centre of a political storm for its alleged dealings with Robert Vadra, has now received a body blow from the capital market watchdog Sebi. DLF, its Chairman KP Singh, some members of the promoter family and a few senior executives have been barred from dealing in stocks and securities for three years by Sebi.

The regulatory action stems from the DLFmanagement's failure to disclose material information to investors during the firm's maiden equity offer in 2007. The Sebi order dated October 10 was uploaded on the regulator's website well after trading hours on Monday when realty stocks such as DLF and Unitech fell 4% while others like Sobha Developers, Godrej Properties and Phoenix Mills rose. Option traders who may have had a whiff of the bad news took positions during the day. Singh's son Rajiv — vice-chairman of the real estate company — and daughter Pia — a whole-time director in the firm — are among those barred from accessing the securities market.

DLF is likely to challenge the order before the Securities Appellate Tribunal, a quasi judicial body.

The controversy that culminated in the final Sebi order was sparked just before DLF launched its IPO.

A few days before the Rs 9,187.5-crore IPO opened in 2007, Sebi had received complaints from one Kimsuk Krishna Sinha, who alleged that DLF group entity Sudipti Estates and other persons had duped him of Rs 34 crore in a land deal.

The complainant, Kimsuk Krishna Sinha, had pointed out that Sudipti had only two shareholders — DLF Home Developers and DLF Estate Developers — which were wholly owned subsidiaries of DLF. The DLF management had then denied that Sudipti was part of the group. Sinha subsequently filed a writ petition before the Delhi High Court, which then directed Sebi to examine the matter. At the high court's direction, Sebi issued show-cause notices (SCN) to DLF and its seven senior officials. The regulator alleged the company and the officials concerned had used a complex corporate structure to disassociate Sudipti from DLF.

Thus, Sudipti did not figure in the IPO prospectus of DLF. "The Noticees actively and knowingly suppressed several material information and facts in the red herring prospectus (RHP)/prospectus leading to misstatements in the RHP/prospectus so as to mislead and defraud the investors in securities market in connection with the issue of shares of DLF," said the Sebi order, which includes the response of DLF and its directors.

In a statement late Monday evening, DLF denied any wrong-doing and said its actions were guided by advice from lawyers and merchant bankers.

"DLF and its board wish to reassure its investors and all other stakeholders that it has not acted in contravention of law either during its initial public offer or otherwise. DLF and its board were guided by and acted on the advice of eminent legal advisors, merchant bankers and audit firms while formulating its offer documents. DLF will defend itself to the fullest extent against any adverse findings and measures contained in the order passed by Sebi. DLF has full faith in the judicial process and is confident of vindication of its stand in the near future."

In his response to Sebi, which is quoted in the order, KP Singh said the show-cause notice was issued to him in his capacity as DLF chairman and there was no allegation of any wrong-doing on his part. Also, he said, there was no concept of strict or vicarious liability under Section 11 of the Sebi Act which would enable the regulator to issue directions against directors in the absence of any specific allegations against them.

Singh's legal representative also submitted that given the complexity and specialised nature of the IPO process and his advanced age of 82 years, Singh relied on the advice of various experts involved in the process such as merchant bankers, and acted in a bona fide manner on such expert advice. Leading investment banks such as DSP Merrill Lynch, Kotak, Citi, Lehman, Deutsche Equities, ICICI Securities, UBS and SBI Capital Markets were associated with the IPO.

"It's an excellent order clearly establishing the fact that in the eyes of law, no one is big or small," said JN Gupta, founder & MD, Stakeholders Empowerment Services. In its order, Sebi said DLF continued to be in control of the board of directors of Sudipti and related entities such as Shalika and Felicite, which remained its subsidiaries even after the purported transfer of shareholding in them on November 29-30, 2006. Thus, according to Sebi, the three companies were related parties and DLF had failed to disclose its related party transactions.

"Sebi has sent the right message to those who think they (can) get (away) by violating regulations and suppressing information," said Huzefa Nasikwala of Nasikwala Law Office. "I would like to see more stringent action from the market regulator in coming days." Sebi's whole-time member Rajeev Kumar Agarwal, who signed the order, said, "I, therefore, find that the purported transfers of shareholding in the said three companies were sham transactions devised as aplan, scheme, design and device to camouflage the association of DLF with these three companies as holding-subsidiary."

DLF trims debt, but the onus is now on real estate to deliver

Although the company’s operating margin fell marginally to around 44%, DLF has begun churning out positive cash flows from operations. Photo: Priyanka Parashar/Mint

Vatsala Kamat  Live Mint 16 feb 14

DLF requires higher revenues from its residential properties to add to future cash flows and profitability

DLF Ltd’s December-quarter results were a mixed bag with an increase in revenues marred by an exceptional item, a provision that dragged down its net profit. The real estate firm’s settlement with the Delhi Development Authority (DDA) on an old contract came as a relief. However, the Rs.411.4 crore provisioning of a foreseeable loss led to a 49% dip in net profit to Rs.145.3 crore for the quarter compared with a year back.

DLF’s saga of high interest continues. Its interest cost of Rs.633 crore on account of its net debt of Rs.19,926 crore on 31 December also had an adverse impact on net profit. However, few positive developments since January have raised investor confidence about DLF’s ability to trim debt through sale of non-core assets.

A report by Religare Capital Markets Ltd, issued about a week back, pointed out that the sale of Aman Resorts at a price that was 19% higher than the earlier deal; the settlement of the DDA issue; and the divestment of its stake in an insurance joint venture has increased investor confidence on the company’s ability to trim debt. At present, net debt is down from the end-December level to Rs.17,400 crore as guided earlier.

With this, DLF is at an inflection point where it requires higher revenues from its residential properties to add to future cash flows and profitability. This would be tough to achieve in the near term given that interest rates continue to remain high and are unlikely to soften in the next couple of quarters. Even in the December quarter, DLF sold 0.6 million sq. ft worth Rs.600 crore versus 0.9 million sq. ft worth Rs.730 crore in the year-ago period.

Although the company’s operating margin fell marginally to around 44%, DLF has begun churning out positive cash flows from operations. In spite of a rise in expenses, its operating profit rose by 7% from the year-ago period to Rs.1,144 crore. Given the challenging economic environment, the stock fell by 43% over the last one-year, which was steeper than the fall in BSE realty index, while the benchmark Sensex rose by 5%.

Now that the realty firm has addressed several negatives despite recessionary market conditions, any triggers by way of higher sales volumes and operating cash flows, could pull the stock up from the present value ofRs.142.

Debt-ridden DLF sells Amanresorts for $358 mn

Mail Today Bureau     New Delhi   Last Updated: February 10, 2014  | 09:19 IST

Real estate major DLF on Sunday announced that it has clinched the deal to sell its luxury hospitality chain Amanresorts to its original founder Adrian Zecha for $ 358 million (around Rs 2,200 crore). DLF is expected to use the money to reduce its debt burden. This forms part of the strategy to exit noncore businesses.

The deal, however, excludes the iconic Lodhi Hotel in Delhi which will remain a part of DLF Ltd.

According to a DLF statement, its subsidiary, DLF Global Hospitality Ltd, has completed the sale of entire 100 per cent stake in Silverlink Resorts Ltd, which owns Amanresorts, to Aman Resorts Group Ltd for an enterprise value of $ 358 million.

Aman Resorts Group Ltd is a Joint Venture between Peak Hotels and Resorts Group Ltd and Adrian Zecha. The sale has been in the form of management buyout.

In December 2012, DLF had signed a pact with Indonesian hotelier Zecha to sell Amanresorts for $ 300 million (about Rs 1,600 crore).

However, the deal was not completed in the stipulated time- frame of June 2013, forcing DLF to walk out of the exclusivity pact. After ending the exclusivity clause, the realty major was in discussion with Zecha and a few other potential investors to sell Amanresorts which has about 25 properties across the world.

DLF Global Hospitality Ltd had purchased 100 per cent equity in Amanresorts in 2007 from a group of investors.

Commenting on the deal, DLF executive director finance Saurabh Chawla said, "This sale of business is another major milestone in DLF's strategy to focus on its core business of real estate and divest non- core businesses and assets.'' Speaking on the deal Adrian Zecha said, " I am delighted to partner with Peak as they share my vision for Aman's future growth and are committed to sustaining our company's reputation for many decades to come." Peak Hotels and Resorts Ltd is an investor in the luxury hospitality industry.

To reduce debt and focus on core realty business, DLF has been selling its non- core assets since last three years. It has raised about Rs  10,000 crore through divestment of its non- core assets that includes hotel plots and wind energy.

DLF gets Rs 676 cr refund from DDA after settling disputes

PTI    New Delhi   Last Updated: February 10, 2014  | 15:45 IST

India's largest realty firm DLF on Monday said it has received a refund of Rs 675.81 crore from DDA following the scrapping of a project to develop an international convention centre in the national capital.

In July 2007, DLF had bagged Rs 6,000 crore contract from DDA for constructing the convention and exhibition centre at Dwarka.

However, the project got scrapped. DLF would now return the 35 acre land that it had got from DDA for Rs 900 crore to develop this project. The realty firm would get a refund of Rs 675.81 crore from the DDA.

In a filing to the BSE, DLF said: "The company has entered into a settlement with Delhi Development Authority with respect to the agreement for allotment of land for setting up an International Convention and Exhibition Centre Project at Sector-24, Dwarka, New Delhi".

Accordingly, said the filing, the company has "received a refund of Rs 675.81 crore from DDA as full and final settlement, after forfeiture of the earnest money in terms of the settlement agreement.

"With the above settlement, all claims of both the parties inter-se relating to the above land shall stand settled."

DLF had planned to develop a large convention centre, three hotels and commercial complexes in this project, which was to be completed before 2010 Commonwealth Games.

However, the project could not take off because of the legal tussle with the DDA over DLF wanting to rope in some foreign partners to execute this project.

On Sunday, DLF announced the sale of its luxury hospitality chain Amanresorts for $358 million (about Rs 2,200 crore).

The funds raised through sale of Amanresorts and the refund from DDA would be utilised largely to reduce the net debt that stood at Rs 19,508 crore at the end of the September quarter.

DLF had set a target to reduce the debt to Rs 17,500 crore by March this year and the same could be easily achieved now.

DLF cuts net debt by Rs 861 cr to Rs 19,508 cr

Press Trust of India  |  New Delhi  

October 31, 2013 Last Updated at 14:31 IST

Sale of non-core assets and internal accruals helped the company in bringing down the net debt level to below Rs 20,000 crore level

India's largest realty firm DLF has reduced net debt by Rs 861 crore in the second quarter of this fiscal at Rs 19,508 crore and the company is targeting to cut it further at Rs 17,500 crore level by March next year.

In an analyst presentation, DLF also said that it is negotiating with the multiple investors to sell luxury hotel chain Amanresorts and expects to close the transaction soon.

"Sequentially, the net debt has declined by Rs 861 crore from Rs 20,369 crore to Rs 19,508 crore. Given the pipeline of divestitures already executed but not yet closed, we maintain the FY14 guidance of net debt of Rs 17,500 crore," DLF said.

Sale of non-core assets and internal accruals helped the company in bringing down the net debt level to below Rs 20,000 crore level.

Realisation from divestment of non-core assets stood at Rs 870 crore during first six months of this fiscal and the company hopes to garner another Rs 1,000 crore in second half of this fiscal from this process.

On the status of divesting Amanresorts, DLF said it is in "negotiations with multiple bidders/investors on the Share Purchase Agreement. Substantial diligence has been completed. Targeting closure of the transaction in near future".

In December 2012, DLF announced the deal with Indonesian hotelier Adrian Zecha to sell Amanresorts for an estimated $300 million and expected the transaction to close by February 2013. Zecha, the founder of Amanresorts, missed the February deadline and exclusivity period was extended till June end.

In July, DLF walked out of a pact to exclusively negotiate sale of Amanresorts with Zecha and opened talks with 4 other potential buyers.

To reduce debt and focus on core realty business, DLF has been selling its non-core businesses and assets such as plots, hotels, wind mills and insurance venture.

It has raised about Rs 10,000 crore in last three years through divestment of its non-core assets.

DLF may sell Rs 900 crore assets to Shriram Group to cut over Rs 21,000 crore debt.

Realtor in talks to divest stakes in southern projects to cut over Rs 21,000 crore debt.

Anshul Dhamija & Boby Kurian, TNN | 30 Sep, 2013, 10.55AM IST

BANGALORE: Realty giant DLFBSE -2.54 %has held talks to divest some of its southern projects worth about Rs 900 crore, or $150 million , to the developer arm of the Chennai-based Shriram Group, said people directly familiar with the matter. 

Shriram Properties is in discussions to acquire land parcels and not yet launched projects of DLF, which is seeking to pare its $3.5-billion (over Rs 21,000-crore ) debt through non-core divestments. 

DLF wants to focus on select cities and pursuer highend developments with better operating margins.

The privately held unit of the $9-billionShriram Group has had more advanced negotiations with DLF regarding the latter's two land parcels in Hyderabad but the discussions also covered not yet commenced projects in cities like Chennai. 

India's biggest developer DLF is unlikely to exit projects that are already under construction. Sources mentioned earlier said DLF has to decide whether it should divest at lower valuations, or wait longer. DLF also has lockin clauses and should retain a stake in some of these projects under the land acquisition agreements with state bodies, which complicates the value-unlocking moves, added one source who did not wish to be named since the talks are private.
When contacted, both Shriram Properties and DLF declined to comment on market speculation. 

Property brokers have assessed that in the years leading up to the 2008 economic meltdown, DLF had splurged at least $1 billion in land aggregation in south India. The total developable area of DLF's land holdings between Chennai, Bangalore and Hyderabad add up to around 18 million sq ft, said an international property consultant, who has reviewed the land parcels. DLF shares ended nearly 3% down at Rs 132 in Mumbai on Friday. 

Shriram Properties, a zero-debt company and sitting on Rs 400 crore cash, could fund the transaction through structured financing support from investors like Indiabulls and JPMorgan. The Shriram group arm has explored tying up more than Rs 1,200 crore in structured debt to step up the development story ahead of a possible initial public offering in the near future. 

Last week, TOI reported that Shriram was also in dialogue with a real estate fund of the Tatas to sell a minority stake. Private equity investors TPG, Starwood Capital and Walton Street are other existing backers of the company.