Cos resort to distress sales of non-core assets


In November 2012, the Delhi-based company sold a plot of land in Mumbai to its competitor Lodha Developers for R2,725 crore. On the face of it, DLF seemed to have got a good deal, having bought the land for R702 crore in 2005. But out of the money Lodha paid, R1,500 crore was to take on the debt of the project. In essence, DLF got only R1,225 crore as cash, not even double the amount it had invested initially.

In December, DLF also managed to sell off Aman Resorts, a luxury hospitality chain, for R1,641 crore, but the sale was to the chain's founder Adrian Zecha after trying for long but failing to find another buyer.

Similarly, real estate company Unitech first announced plans to sell non-core interests including SEZs and IT parks in 2011 but with no takers so far, it has only been able to mop up money through sale of some land pockets.

The situation at Suzlon Group and Lanco is similar to a certain extent. While Suzlon is more or less forced to divest non-core assets as part of its corporate debt restructuring scheme, Lanco has announced plans to sell two road projects and reduce holdings in hydro and thermal power projects as it seeks to reduce its R32,000-crore debt before the situation becomes critical.

Delays in finding a buyer for a partial stake sale in its holding company for power projects and raise R4,150 crore has forced Lanco to look at selling stakes separately in three power projects in Udupi, Amarkantak and Babandh for R2,500 crore.

"This indicates that deal activity was driven by sellers desperate for cash who sold off without waiting too long for an improvement in valuations and market conditions," said a transaction consultant with a global audit and consultancy firm.

Calendar 2012 saw a slew of asset sales by promoters with a heavy debt burdens, but lack of buyers meant that such deals were often rushed. "In the game-changing deals of the year, the key strategy of sellers was to focus more on core businesses and reduce debt," said investment advisory and consultancy firm Grant Thornton in its Annual Deal Tracker report for 2012. "Several multi-million dollar deals were struck in primarily to reduce the debt burden such as Diageo-USL deal, Aditya Birla-Pantaloon deal."

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