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DLF in negotiations to sell wind assets for about Rs.10 Billion

India’s largest realty developer DLF Ltd. is discussing to sell Rs.1,800 crore worth of non-core assets during the next fiscal year to reduce its debt various reports said.

A senior DLF executive was quoted as saying, the company had commenced negotiations with investors to raise Rs.1,000 crore through the sale of its wind power business.

In March last year, Aatash Shah, research analyst with Nomura Financial Advisory and Securities India Pvt Ltd, wrote in a report to clients, “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.”

As early as May 2010, we had noted that, 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 2010 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.

This time though, sources that Panchabuta talked to said, there were a number of IPP’s backed by large private equity firms that are on the path to IPO and ideally suited to acquire the asset. These players have not been able to scale their wind assets to the numbers they had originally planned and hence this acquisition provides them with a one time opportunity.

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