DLF raises Rs 2,400 crore from SBI through lease rental discounting

MUMBAI | NEW DELHI: In the largest Lease Rental Discounting (LRD) transaction this year, realty developer DLF’s rental arm DLF Cyber City Developers Ltd (DCCDL) has raised Rs 2,400 crore from the country’s largest public sector bank, State Bank of India.

In the backdrop of general concerns over liquidity for real estate and rental assets, the deal assumes significance as the funding carries an interest rate of 7.35 per centfor tenure of 15 years with a structured repayment schedule. The rate will be linked to SBI’s marginal cost of funds-based lending rate (MCLR). Most LRD transactions are usually sanctioned for tenure of up to 12 years.

The financing from SBI sets a benchmark for LRDs in the country, and it is one of the biggest disbursements by a public sector bank during the pandemic.

“The funding is certainly an endorsement of our robust commercial portfolio. Despite the current uncertainty, we are committed to reducing our borrowing cost while creating long term value for our stakeholders. Majority of the loan will be used to refinance existing debt, and the balance will be used to fund future expansion of the company,” said Vivek Anand, Group Chief Financial Officer, DLF.

The funding has been secured against two rental assets with 2.4 million sq ft office spaces at DLF Cybercity in Gurgaon.

DCCDL that counts Singapore’s sovereign fund GIC as its partner is planning to use the funds secured through this transaction to repay its debt worth Rs 1,950 crore raised earlier from mortgage lender Housing Development Finance Corp (HDFC), while balance will be utilized for future growth.

DLF has been looking to optimize its treasury portfolio, reduce debt and interest costs.

Currently, the company has a total debt of around Rs 19,500 crore and will stand reduced to Rs 17,550 after the repayment of HDFC loan. ET’s email query to SBI remained unanswered until press time.

According to financing experts, the size and tenure of the transaction demonstrates the company’s diverse tenant profile and its ability to generate long-term cash flows from its real estate asset portfolio.

Lenders have turned cautious about the profile of borrowers even if the deal is backed by a stream of steady income flow. The funding scenario continues to be tight and would take some more time before it comes back to normalcy, they said.

DLF has an operational rental asset portfolio of around 35 million sq ft across the country with over 1,600 tenants of which 60 per centare large multinational companies. DCCDL has maintained 95 per centoccupancy level and has collected 96 per centof its rentals during the last two quarters marked by the Covid19 pandemic. With this new transaction, the company will have around 23 million sq ft of its total rental portfolio monetized through LRDs.