DLF Gets Ready for DAL listing

DLF has completed the merger of Caraf Builders & Construction, which owns investment trust DLF Assets Ltd (DAL), with another offshoot DLF Cyber City, a move India’s biggest realtor says is logical to listing DAL on the Singapore Stock Exchange (SGX). A company spokesman confirmed the development while two senior executives involved in the listing process said DAL, set up to acquire properties from DLF and other developers for leasing out to third parties, is likely to be listed on SGX in the first quarter of 2010-11 .

Though DAL’s listing was not dependent on the merger, it was important that the integration with Cyber City, a wholly-owned subsidiary, was completed before the listing as the move is also aimed at further streamlining all commercial assets under one head, said the first executive on condition of anonymity. Under SGX norms, a company planning to list cannot reveal listing plans before its draft prospectus is approved.

Merging DAL, which buys and manages commercial assets on the lines of real estate investment trusts, with Cyber City will ringfence DLF from the uncertainties of the property market as it guarantees a steady stream of revenues, said the second executive. DLF acquired Caraf from promoters KP Singh and family last December in a share swap deal and decided to give it a 40% stake in its Cyber City. By consolidating the group’s rental assets, that transaction too was aimed at ensuring a steady cash flow.

The rental business of DLF and Caraf together generated annual incomes of Rs 700 crore and Rs 550 crore in the current fiscal. Post-merger , the rental business is expected to give DLF an annual come of Rs 1,500 crore in 2010-11 , which should be 20% of the total income, said the second executive . As the merger is effective from March 19, its effect will not be reflected in the current financial year, he added.

Realty stocks plunge on RBI rate hike

22 Mar 2010, 1120 hrs IST, PTI

MUMBAI: Stocks of realty firms slipped as much as 4 per cent on the Bombay Stock Exchange (BSE) after the Reserve Bank hiked key interest rates to tame inflationary concerns, a move that could make home loans dearer. 

Realty firm Unitech slipped to Rs 70.55, down 4.27 per cent and country's largest realty player DLF fell 3.53 per cent to Rs 301.65 on the BSE in the early morning trade. 

Realty index on BSE which comprises 14 realestate stocks slipped 2.59 per cent to a low of 3,254.26 points. 

"Realestate sector is rate sensitive, rate hike by the Reserve Bank of India will make home loan costly for the common man in turn affecting the product of the realty estate firms as their will be less buyers," SMC Capital Vice-President Rajesh Jain said. 

Other stocks who were under pressure are -- Indiabulls Real Estate (down 3.03 per cent), HDIL (2.06 per cent), Ackruti City (1.16 per cent) and Sobha Developers (0.84 per cent). 

On Friday, the RBI hiked the short-term rates at which it borrows and lends funds to banks by 25 basis points each, adopting a tight money policy. 

The Central bank raised the repo( rate at which it lends to banks) and the reverse repo rates (the interest it pays to the banks on deposits) by 25 basis points each to 5 per and 3.5 per cent, respectively.

Is Prestige Estates Doing A Rethink On Rs 1.2k Crore IPO?

March 17 2010, 09:20:58 IST | BOBY KURIAN

Promoter rebuts market rumours, says he's waiting for final SEBI clearance.

There are speculative talks that Bangalore-based real estate major Prestige Estates may be "re-thinking" on its proposed plan to raise up to Rs 1,200 crore through an initial public offer (IPO). Prestige had filed its draft red herring prospectus with Securities Exchange Board of India in November last year for the public issue for divesting up to 15%-20% stake.

Sources directly familiar with the development said, the promoter family was in the midst of a re-think, which might see it deferring the plan or even dropping it. The firm is yet to receive a     final clearance from the market regulator nearly four months after filing the prospectus. It has appointed Enam Securities, UBS, J.P. Morgan and Kotak Mahindra Capital as its book running lead managers for the issue.

An email sent to Prestige Group chairman Irfan Razack, seeking a confirmation on IPO deferment, did not elicit a response at the time of posting this article. However, Razack replied through a text message, saying, “just to set the record straight, we have not deferred our plans for IPO. We are just awaiting the final nod from SEBI and are fully geared up.”

The three co-promoters are Irfan Razack, Rezwan Razack and Noaman Razack and their family members own 33% each in the company. One source, who did not wish to be quoted, said, the family was still debating whether remaining private was in the best interest of the company's growth ambitions and for the future roadmap being readied by the promoters. In doing this, the promoters have looked at the experience of some city-based realty peers who went public.

"While the work on IPO may be still on, there exists a possibility of them not going ahead with the public issue for the time being at least," said a second source familiar with the situation. "I do not see the issue going through before June this year even if the momentum is stepped up," he added.

Further, the market appetite for real estate issues seems to be evaporating with the last few issues performing badly on debut. The last two listing in this space, DB Realty Ltd and Vascon Engineers, are currently trading below the lower band of their issue prices.

DB Realty, which had slipped by 10% on its debut, is currently trading Rs 456 against the issue price of Rs 468-486. Vascon, which is involved in EPC and realty business, is currently trading at Rs 141.5, a 14% discount to its issue price of Rs 165.

And there is still a long list of realty firms working towards an IPO. This includes over half a dozen players like Emaar MGF, Lodha Developers, Sahara Prime, Prestige Estates, Nitesh Estates, BPTP and Oberoi Realty. While BPTP has said it plans to raise Rs 1,500 crore in the early next fiscal, Emaar MGF and Lodha also have SEBI approval for a Rs 3,850-crore and Rs 2790-crore offerings, respectively, but have not decided on a timeframe for the issues.

"Valuation challenges are significant and the possibility of having to divest more shares than anticipated is real," explained a top honcho at real estate firm, which may be eyeing the public markets in the short run.

Prestige promoters have been running very closely-held operations and have shied away from private placements at the holding entity level several times in the past. The company has attracted private equity funds from CapitaLand of Singapore  and Redfort Capital at the SPV level. In context, it is left to be seen if the promoter family would walk the extra mile to convince the market, which is growing skeptical about more realty issues.

One of the reasons behind a possible IPO from Prestige was the fact that the next-generation promoters wanted to run a professional operation, and not being hands-on managers. And a listed entity was seen as better suited to attract professional managers. So a possible rethink and deferring of IPO plans could be dictated by the market conditions as well as a closer scrutiny of the business roadmap for the future.

A large part of its saleable area is in the residential space besides exposure in retail, commercial buildings and hospitality. For the year ended March’09, the company had a total income of Rs 914 crore with net profit of around Rs 77 crore. The realty sector, which suffered a severe slowdown on account of the global crisis, is now slowly recovering with sales picking up and the demand for quality office space now resurfacing. Source: VCCircle

CCCL Infra looking at PE for Rs 2,000 cr investment

Business Standard: March 10, 2010

Chennai: CCCL Infrastructure Ltd, part of the Chennai-based Consolidated Construction Consortium Ltd, is planning to raise money through private equity for its proposed investments to the tune of around Rs 1,500-2,000 crore. Besides, the company is also planning to foray into power generation and logistics business.

Speaking to Business Standard E Viswanathan, chief executive officer, CCCL Infrastructure Ltd said over the next 18 months the company is planning to invest around Rs 1,500 to Rs 2,000 crore in various projects.

“We are looking for private equity fund to partly fund the investment.” The company is presently in the process of evaluating the value and proposed dilution, he added.

The proposed investment includes Rs 153 crore to create infrastructure at Pearl City Food Port (SEZ), a special economic zone for food processing industry being set up by the company at the port city of Tuticorin in south Tamil Nadu.

“The first unit, being set up by Hexa, a honey maker, is likely to start production by end of this month in the SEZ.”

The company has acquired around 900 acres for setting up the SEZ which will also have a residential project, helipad, hotels, golf course and others.

“One of the first of its kind infrastructure would be automated movements of goods within SEZ.” Since the SEZ will cater to export market, especially to quality-sensitive markets, no vehicle will be allowed inside the SEZ, and the entire SEZ will be automated whereby any movement within the SEZ will be on conveyor, said Viswanathan.

“Housing project would cost around Rs 400 crore, which will be taken as part of phase II development,” he added. The company is also scouting for partners for schools and other commercial developments inside the SEZs.

The other projects, in which the company is planning to invest are automatic car parking facility in Delhi for an estimated cost of around Rs 272 crore and a Ro-Ro facility, for handling cars, at Chennai port for an estimated cost of around Rs 150 crore.

“We got L1 for setting up the automatic car parking facility, which will handle 1,500 cars. The project will be executed on a 30 year BOT model,” said Viswanathan.

Commenting on the proposed foray into logistics business, he said, the company has tied-up with a Korean-company, he declined to reveal the name, to create automatic RoRo facilities at Indian ports. “We will jointly bid for Chennai Port project first, which is estimated to be around Rs 150 crore.”

The company won Chennai-Tirupathi road connectivity project and likely to take up two more road projects. “Total aggregate value of these projects would be around Rs 1,500 crore.”

“The other major diversification would be power,” said Viswanathan. The company is planning to set up a one mega watt solar-based power plant at Tuticorin. The plant can be expandable to five mega watt. “We will finalise the papers by March.”

He added, the company will also look at bio-mass based power plants in Tuticorin, once the SEZ gets 60-70 per cent occupancy. “We can source raw materials for the power plant from the SEZ,” said Viswanathan.

NHB to press for tax exemption for annuities

RMLEA is unique as it is the world's first ever market-led scheme of its kind

More returns: K.S. Sripathi, Chief Secretary, S. Sridhar (right), Chairman, Central Bank of India, and R. Desikan (left), trustee, Consumers Association of India, at a seminar on Reverse Mortgage Enabled Annuity scheme to mark the World Consumer Rights Day in Chennai on Monday.

The National Housing Bank (NHB) will press for tax exemption for annuities provided to senior citizens under the recently-launched Reverse Mortgage Loan Enabled Annuity scheme (RMLEA), NHB chairman and chairman of Central Bank of India S. Sridhar said on Monday.

Addressing a workshop on the new scheme hosted by the Consumers Association of India (CAI), Mr. Sridhar said that the NHB would route its request through the Central Board of Direct Taxes and seek exemption for RMLEA accruals for senior citizens in the Union Budget for the next fiscal. Though the RMLEA is a substantially improved product compared to its predecessor the Reverse Mortgage Loan, the annuities are now treated as salaries and taxed accordingly.

The NHB which had launched the RML scheme with basic features in 2007 had gone back to the drawing board with a slew of suggestions from senior citizens and launched an improved version that offered higher security for the elderly in 2009.

“We would like senior citizens enrolling for the scheme to provide feedback on features they would like and the NHB could review what could be done,” Mr. Sridhar said.

While Central Bank of India is the sole bank offering the RMLEA after tying up with Star Union Dai-ichi Life Insurance, 22 other banks are offering the earlier reverse mortgage scheme. The NHB chairman sought more banks to roll out the new scheme after identifying insurer partners.

The RMLEA is unique because it is the world's first ever market-led scheme of its kind unlike in other countries where such schemes are Government-administered, Mr. Sridhar said.

Chief Secretary K.S. Sripathi said social changes had resulted in a large number of elderly couples with no one to depend on. Most of them have their children working abroad and had to lead their lives without physical, financial or emotional support, he said. P.R. Jaishankar, AGM, NHB, said the annuity product was conceived to offer security to the elderly who constituted 7 per cent of the population in India — about 7.7 crore. The new scheme, where senior citizens mortgaged their property with a bank, offered almost twice as much returns as annuity than the monthly/quarterly accruals under the previous scheme. It also provided a continuum of annuity cover lifelong whereas the original reverse mortgage scheme also had a time limit of 15 years, extendable to a maximum of five years.

R. Desikan, CAI Trustee, said the organisation which had provided inputs for calibrating the mortgage enabled annuity scheme would press for a better regulated Consumer Protection Act in the country. Source: The Hindu

Central Bank to buy out partners in mortgage subsidiary by month-end

Sudeep Jain / Mumbai March 16, 2010, 0:36 IST

Public sector Central Bank of India expects to complete the buyback of its mortgage finance subsidiary, Centbank Home Finance, by the end of the current financial year.

One of the promoters, Unit Trust of India (UTI), had already agreed to sell its 16 per cent stake in the home finance company to Central Bank, said a senior bank executive. “The two other stake-holders, National Housing Bank (NHB) and Housing and Urban Development Corporation (Hudco), will put up the matter before their respective boards in the next few days. We are confident that we will complete the process by March 31,” the executive added.

The bank is offering to buy out its partners at a price of Rs 104.8 per share, which is equal to the book value.

Central Bank has a 59.5 per cent stake in the subsidiary while UTI and National Housing Bank (NHB) hold 16 per cent each. The remaining 8.5 per cent is held by Housing and Urban Development Corporation (Hudco). While Central Bank nominates five directors on the board, Hudco, NHB and UTI nominate one director each.

The capital base of the home loan company is Rs 20 crore, while its net worth is Rs 48 crore. During 2008-09, its net profit was Rs 3.18 crore. Its gross outstanding loans were Rs 257.88 crore at the end of March.

According to sources, it is likely that Central Bank will sell Centbank Home Finance as it has started a restructuring exercise to raise the subsidiary’s valuation. The Mumbai-based public sector lender had appointed Ernst and Young for advice on restructuring and valuation, said bank sources.

In order to increase the profitability of Centbank Home, Central Bank recently provided it a credit line of Rs 100 crore that would be partly used to repay the entire debt of NHB.

The recast included shifting the headoffice of Centbank Home from Bhopal to Mumbai. Source: Business Standard

TPG May Back Shriram Properties' Buyout Moves

March 08 2010, 15:54:25 IST | BOBY KURIAN & MADHAV A. CHANCHANI; Source: VCCircle

The PE giant has in principle interest to invest $100 million to help the developer script IPO story.

Private equity giant TPG Capital may be backing a consolidation move attempted by Bangalore-based real estate developer Shriram Properties in acquiring real estate assets.

At least two sources, directly familiar with the developments, said, TPG was willing to consider investing around $100 million in the developer who is mulling an initial public offer in the near future. 

"This is an in-principle interest, not a commitment, to participate in opportunistic acquisitions that will bolster the IPO story," explained one source. TPG has earlier backed another Shriram group company when it picked up a 49% stake in Shriram Retail Holdings, the holding company
of Shriram City Union Finance, for Rs 530 crore in 2008. This was followed by an open offer for another 20% stake.

When contacted, a TPG spokesperson declined to comment. Shriram Properties MD M Murali said, the company was scouting for portfolio acquisitions and was in discussions with several PE funds. The company has not received any specific interest from TPG regarding this, he told VCCircle on phone, when contacted, while an emailed query remained unanswered. Shriram Properties is in the market for opportunistic buyouts to script a story for the proposed IPO. This could include portfolio acquisitions or outright M&A, sources added. Shriram Properties had discussed a portfolio transaction with Bangalore-based Sobha Developers last year but has renewed its prowl in a sector where consolidation play is usually tough.

In July last year, The Economic Times reported that Shriram Properties was working with Macquarie and Enam for a Rs 500-700 crore IPO, even though the timeframe for the same may be stretched in the current environment.

Any potential portfolio transaction would involve  Shriram Properties buying a bouquet of real estate projects from a developer at the SPV level. Shriram could also look at the option of reverse merger, where it acquires a listed company and merges with it. This could be a possibility if the markets remain choppy and an IPO becomes a challenging proposition.

Shriram has projects under development in Bangalore, Chennai, Vishakhapatnam and Kolkata. Shriram has completed 4.23 million sq. ft. of residential space and 1.03 million Sq. ft. of commercial space, in addition to 67 million Sq. ft. of built-up area currently under various stages of development.

The firm has also recently forayed into the area of mid-income housing. It raised Rs 40 crore from ICICI Prudential Asset Management Company Limited and India Opportunities Real Estate Fund (Mauritius) for their 16-acre residential project in Yelahanka, the northern suburb of Bangalore. Shriram Properties has also raised funding from Walton Street Capital, Starwood Capital Group & Sun Apollo in the past.

Though real estate firms have rushed to file for their public offerings, the markets appear to have lost the appetite for such issues. Some like Godrej Properties, DB Realty Ltd and Vascon Engineers have already managed to go ahead with their listing. Over half a dozen players like Emaar MGF, Lodha Developers, Sahara Prime, Prestige Estates, Nitesh Estates and Oberoi Realty are also waiting in the wings. But with market volatility increasing, some of the larger issues like those of Emaar MGF, have been delayed.

SEC norms hit NRI investments

Peter Arckal, TNN, Mar 6, 2010, 02.37am IST

MUMBAI: The tightening of compliance norms by US regulator Securities Exchange Commission (SEC) may force foreign financial companies in India with operations in the US to revisit their business strategy for NRIs based in that country. 

According to analysts, the norms, which come into effect on March 12, could increase costs for financial services companies. The amended rule will provide SEC and the public better information about the custodial practices of registered investment advisers. 

In light of these regulations, ING Vysya has discontinued securities services -- portfolio management scheme and MF investment -- for NRIs who are ‘‘designated US persons''. In a letter to an NRI based in the US, the bank said: ‘‘Various US securities and tax regulations relating to the provision of certain securities services have an extraterritorial reach. As a result, ING Vysya Bank (IVBL), too, is required to comply with procedures specifically applicable to designated US persons to provide these services. This vastly increases the cost of providing these services. As a result, IVBL has, based on an economic strategic and risk perspective, decided to discontinue providing securities activities to designated US persons.'' 

The bank, however, will continue to provide other services to NRIs based in the US. ‘‘Designated persons'' are generally defined as a natural person, residing in the US or any entity organised or incorporated under the laws of the US. US citizens living aboard may also be deemed US persons under certain rules. When contacted by TOI, an ING Vysya spokeswoman confirmed having discontinued securities services for designated US persons, including NRIs. ING Vysya said its focus on ‘‘NRI business has not been dominated by US customers and, hence, a very small number of customers are impacted''. 

SEC has made amendments to Investment Advisers Act of 1940 relating to custody of client assets to provide additional safeguards for investors. The amendments come after a review by SEC following the Madoff scandal and several Ponzi schemes involving misappropriation of customer assets. 

However, it's not immediately clear whether other foreign financial services companies, and as a result a large number of NRIs, would also be impacted by the SEC ruling. Several foreign financial services companies did not reply to TOI's email queries on whether the new norms would impact them or whether securities servicing costs would go up. 

However, a Franklin Templeton spokesman said: ‘‘We don't expect this development to have any impact on us as we do not distribute our India-domiciled products in the US. We have a US-domiciled Indian equity fund that US residents can access.'' 
Analysts said the SEC stipulations would increase costs. A source said: ‘‘Look, what did SOX (Sarbanes-Oxley Act of 2002 enacted as a reaction to scandals, including Enron and WorldCom) do? It made IT guys richer and banks poorer. The SEC norms will make auditors richer and banks poorer.'' Source: Economic Times

India Infoline Advises to Buy Indiabulls Real Estate for target of Rs 185

India Infoline has advised high-risk traders to buy Indiabulls Real Estate for target of Rs 185. “Indiabulls Real Estate is pointing to continued strength in the weeks to come as it has broken a downward-sloping trend line since early-January 2010. A detailed study of the daily chart shows that the stock has corrected from the high of Rs 236 in January 2010 to touch a low of Rs 151 last week.

On Thursday, the stock staged a smart breakout past the downward sloping trendline. This bullish breakout signals the end of the intermediate downtrend. We recommend high risk traders to buy the stock in the range between Rs 171-175 for a target of Rs 185 with stoploss of Rs 166,” the report said.