DLF seeks Indian partner for insurance JV

Wednesday 28, July, 2010 India’s largest real estate firm DLF is likely to bring in a strategic Indian investor in DLF Pramerica Life Insurance, its insurance joint venture with US-based Prudential International Holdings. Under the proposed deal, the successful Indian investor may acquire up to 44% stake in the insurance firm and will become the largest shareholder, said a senior executive familiar with the development. DLF, which currently holds a 74% stake, will continue to hold up to 30%, he said. Prudential’s holding will remain at 26%, the maximum a foreign firm can hold under current laws. The company is in talks with a leading non-banking finance company and expects to close the deal in the next couple of months, said another executive familiar with the negotiation. When contacted, a DLF spokesperson said, “We do not comment on market speculation.” Depending on the negotiations, the new partners will pick up the stake through a combination of a fresh issue of shares and stake offloaded by the existing Indian promoter, said the executive. DLF had ventured into insurance in 2007 when the realty boom was at its peak. Currently, the JV has paid-up capital of Rs 250 crore. Of this, DLF has invested Rs 185 crore and balance Rs 65 crore is invested by Prudential. Although the negotiation has not reached the valuation stage, the executive said that the deal is likely to happen at marginal premium to the face value. One of the key reasons for bringing in a new partner is to infuse fresh capital in the company, said the first person. “For DLF, insurance is non-core business and the real estate firm has decided to reduce its exposure from non-core assets,” he added. DLF, as part of focusing on core business of real estate development, has also decided to divest the premium hospitality company Aman Resorts while retaining Aman New Delhi, formerly Lodhi Hotel. Earlier this month, realty major decided to dilute the majority stake in wholly-owned retail management subsidiary DLF Brands, to a promoter group firm. However, it has decided to retain the wind energy business, valued at Rs 1,000 crore, because of tax benefits. DLF had planned to raise Rs 2,700 crore this fiscal through a sale of non-core assets as part of its plans to reduce net debt of Rs 16,421 crore by Rs 5,000 crore. In 2009-10, the company had decided to raise Rs 5,500 through sale of non-core assets, but was able to raise only Rs 1,800 crore.

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