DLF would need to resort to non-operational funding sources such as the sale of non-core assets like wind power business among others- Aatash Shah, Nomura Financial Advisory

DLF had created a separate subsidiary called DLF Wind Power for its wind energy business as a precursor to sell its wind assets. The subsidiary DLF Wind Power had been placed in the market some time in March-April last year to enable it divest it’s non-core business and help with its debt repayment.

At that time, the company was being  advised by Ernst & Young  in this regards and the initial names doing the rounds included BG Group Plc,  Hong Kong-based CLP Group , India’s Adani Group, Essar Power and Infrastructure Leasing & Financial Services Ltd.

The size of installed capacity at that time was expected to be around 260MW making DLF Wind Power one of the largest IPP wind developers in India. The expected valuation was close to 1100 crore. The due diligence was carried out by Paris-based Gaz de France, a major energy player in Europe and renewable energy group Akuo Energy. However it was rumored that the deal fell through on accounts of valuation.

Since, as Panchabuta had reported in May last year, DLF had decided to retain its wind energy business valued at Rs 1,000 crore because of tax benefits.

According to this report a couple of days back, DLF, the largest realtor by market capitalisation, has mandatory repayments of Rs210 crore coming up as it had refinanced Rs1,458 crore in the last quarter.

Though company officials claim it is in a comfortable position in terms of debt, analysts aren’t convinced.

“We believe the FY12 run rate of operational cash surplus before interest should average about Rs400 crore a month, up from about Rs200-250 crore currently. Given that interest cost is itself expected to average about Rs200 crore a month, we do not believe the company would be able to reduce its debt by more than Rs2,000 crore in FY12F and possibly even in FY13F,” Aatash Shah, research analyst with Nomura Financial Advisory and Securities India Pvt Ltd, wrote in a report to clients on March 14 while maintaining a neutral rating on DLF.

Panchabuta when talking to investment bankers understands unofficially that no one has been given a mandate yet this time to find a possible  buyer. Further, it seems like this is an annual exercise that seems to be carried out for valuation purposes than for actually selling the assets. With numerous Wind IPP announcing ambitious expansion plans and a lot of interest in acquiring such assets, there exists an opportunity for DLF to sell their wind assets at  attractive valuations in the near term.