DLF to Borrow $1.5 Billion, Invest in Singapore IPO

DLF to Borrow $1.5 Billion, Invest in Singapore IPO
By Subramaniam Sharma

Oct. 11 (Bloomberg) -- DLF Ltd., India's largest developer by value, plans to borrow as much as $1.5 billion overseas to fund construction and acquisitions, tapping soaring demand for Asian real-estate companies.

The developer will spend as much as $750 million buying land and building properties in India and abroad, the New Delhi- based company said in a statement to the Bombay Stock Exchange. The remainder will be used to buy shares in an initial public offering by group company DLF Offices Trust in Singapore.

DLF, controlled by billionaire Kushal Pal Singh, is turning to international capital markets after raising a record $2.3 billion in June through India's biggest IPO. The developer needs cash to develop office space, homes and shops as the economy's 8.6 percent-a-year growth drives demand.

``If overseas investors are looking at a five- or 10-year horizon, then it's a booming real-estate country,'' said Shailesh Kanani, an analyst at Angel Broking Ltd. in Mumbai. ``It's the best time to raise funds as global markets are flush with liquidity.''

DLF rose 26.1 rupees, or 2.9 percent, to a record 918.55 rupees at the 3:30 p.m. close on the Bombay Stock Exchange.

The stock has risen 75 percent since it started trading, valuing the developer at $40 billion. DLF will be included in India's benchmark Sensitive Index starting Nov. 19, as it ranks as the nation's fifth-largest company by market value.

Overseas Loan

DLF plans to raise the overseas loan in the next 30 days, Saurabh Chawla, senior vice president, finance, said in an interview from New Delhi.

DLF Offices Trusts, which will hold properties of group company DLF Assets Ltd., will file to sell shares in Singapore in the next few weeks, Chawla said. The sale may take place in January, he said.

``Global investors do not have an exposure to Indian real estate investment trusts,'' Chawla said. ``India is predominantly still a services-driven economy. Office space will form a major portion of this growth and global investors do not have any play in that.''

The sale by DLF Offices Trust may be the second initial offering in Singapore of an Indian real estate investment trust.

In July, Ascendas Pte, the manager of Singapore's biggest industrial property trust, raised S$549.5 million ($375 million) from the sale of shares in an Indian REIT.

Better Return

Asian property owners are planning to sell shares in as many as 15 REITS a year as real estate offers twice the average return of stocks, according to estimates from Goldman Sachs Group Inc.

REITs raise money from equity investors and then borrow to buy properties such as shopping malls, business parks and office towers. They are usually required by law to pay most of their profit as dividends.

Investors prefer REITs because they are perceived as being less risky than putting money directly into real-estate projects.

India's real-estate market may swell more than sevenfold to $90 billion in the 10 years to 2015, Moody's Investors Service said in June, citing industry estimates.

In the past three months, DLF has forged partnerships with two overseas companies. In August, it formed a joint venture with Hines, a closely held U.S. property investor, to develop an office, retail, hotel and entertainment project on a 15-acre site in Gurgaon, on the outskirts of the capital New Delhi.

This month, DLF said it's collaborating with a unit of Dubai World to develop a $15 billion township near Bangalore.