Media reports indicate that DLF has consummated a land transaction for INR 5.67 bn across 17 acres in 4 cities (Kolkata, Chennai, Mysore and Thiruvananthapuram). We view the deal as a directional positive as it would mark another step towards its asset monetization program. We reiterate ‘BUY/Sector Performer’ with a NAV/TP of INR 264/share.
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Event: According to media reports, DLF has sold four land parcels for INR5.67bn to a Kolkata-based consortium of Avani Projects and Square Four Housing & Infrastructure. These assets were held in its 100% subsidiary, DLF Hotels & Hospitality (excludes Aman Resorts). The company had, in Q3FY12, bought out stake of its 26% partner for INR1.2bn as a precursor to this deal. DLF Hotels & Hospitality owns land parcels in Kolkata, Chennai, Mysore, and Thiruvananthapuram. According to the article, the consortium has made the entire payment towards the transaction. Total land holding across these four parcels is 17.14 acres (Kolkata – 6 acres, Chennai - 6.6 acres, Mysore - 2.4 acres and Thiruvananthapuram - 2.14 acres).
Analysis: Taking the reported deal at face value, valuation works out to INR331 mn / acre, which is extremely high considering that all the land parcels are in Tier II and III cities. Hence, we do not rule out the presence of significant cash sitting in the subsidiary, and await clarity on DLF Hotels & Hospitality’s balance sheet. DLF has set up a core committee to focus on asset monetisation and fixed a target of INR 30-40 bn to be monetised over the next six months. Some of the other assets lined up for sale are Aman Resorts, NTC Mills Land at Lower Parel (Mumbai) and the wind power business.
Our view: Asset monetisation focus positive; maintain ‘BUY’
We view this news as a directional positive as DLF is currently saddled with significant debt (INR227 bn), reduction of which is crucial for sustained stock performance. We note that the company has renewed its focus on asset monetisation and execution, which is a significant positive. We reiterate ‘BUY/Sector Performer’ on DLF with TP of INR264/share.
Regards,
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