DLF stock surges on talk of stake sale by promoters

ET NOW: Its fourth-quarter results have been dismal, but the scrip of DLF, India���s largest real estate company, has risen by 6.4% this week amid speculation that the company���s promoters are looking to sell a 4-5% stake to raise around Rs 2,000 crore for paying DLF Assets��� (DAL) dues to the listed entity. The DLF spokesperson, however, categorically denied that any such move was in the offing.

The DLF stock surged a cumulative 13% in the first two days of the week but fell by around 6% on Wednesday. Two persons who claim to have knowledge of the situation said DLF promoters were in talks with institutional investors to dilute their holding in the company and raise around Rs 2,000 crore.

Two real estate analysts working with brokerages also told ET NOW that the share price appreciation was linked to rumours about promoters offloading a small portion of their near 90% stake in the company.

DAL ��� which is owned by the Singh family, the promoters of DLF ��� houses the IT SEZ projects of DLF, and buys completed IT properties from the real estate company. It needs to pay Rs 4,903 crore to DLF and the company has recently appointed a committee of independent directors to evaluate its options vis-��-vis DAL.

The real estate company has also suspended sales to DAL. DLF vice-chairman Rajiv Singh in an analyst call last week said the company hopes to receive Rs 2,000 crore from DAL this year. DAL is co-owned by private equity fund DE Shaw and London-based Symphony Capital.

A UBS research report dated May 4, 2009, said: ���We think the most straight-forward option for the promoters to ensure liquidity to DLF is to sell part of their stake in DLF.��� But in an emailed response, the company spokesperson said: ���We strongly deny the stake sale news.������

Some real estate analysts feel that if the speculation of a small stake sale by promoters turns out to be true, it could prove to be a neat way of solving the DAL impasse. The promoters could provide the stake-sale proceeds to DAL, which in turn will use the money to reduce its outstanding receivables to DLF thereby addressing a major concern of the investor and analyst communities.