DLF seeks to to cut debt

DLF is seeking to sell its controlling stake in the Aman Resorts luxury hotel chain as part of a plan by India’s largest property developer by sales to cut its high debt levels by about Rs50bn ($1.1bn).

The Indian developer – hit hard by the slowdown in India’s real estate market during the global financial crisis – hopes to raise $350m by selling its controlling stake in Aman Resorts to an Asian or Middle Eastern sovereign wealth fund, investment banking sources said.

However, analysts said DLF is struggling to find buyers willing to pay its asking price, in spite of the undisputed prestige of the Aman brand.

Malaysia’s Khazanah and the Abu Dhabi Investment Authority are among those said to have been approached. Khazanah last week denied Indian media reports that it was negotiating to buy the hotels.

“They are not able to get a good valuation,” said Param Desai, a Mumbai-based real estate analyst for Angel Broking.

Aman Resorts – founded by the hotelier Adrian Zecha in 1988 with his flagship property, the Amanpuri on the Thai resort island of Phuket – is revered by elite global travellers for the design, exclusivity and highly personalised services of its 24 small luxury hotels.

The hotel chain, which charges upwards of $600 a night, has properties in Bhutan, Cambodia, Laos, Indonesia, French Polynesia, Morocco, Montenegro and India.

DLF, founded by the real estate baron Kushal Pal Singh, who is ranked among the richest people in India, bought the hotel chain for an estimated $400m in 2007, when the global market was at its peak.

The acquisition of Aman Resorts was part of a wave of takeovers by Indian property companies of high-profile assets abroad and came as DLF, riding high on India’s speculation-fuelled property market, had borrowed $1.5bn from overseas to fund expansion.

But like other Indian property companies, DLF, best known for developing New Delhi’s satellite city, Gurgaon, soon found its profit margins under intense pressure as a result of falling prices and lack of demand during the global financial crisis.

“In hindsight, you can say it’s a mistake,” Mr Desai said of DLF’s Aman acquisition.

India’s real estate market is gradually recovering and DLF reported that its quarterly net profit for the quarter ending in March doubled to about $94m from the year before as sales also rebounded.

However, high debt remains a concern for the company, which is now in the process of trying to sell off non-core assets to reduce its debt by about Rs50bn ($1.9bn), or about one-third of its total debt, in the current financial year.