DLF today said its promoters have deferred till March next year conversion of securities held in the realty major’s subsidiary into equity shares while slashing the coupon rate from 9% per annum to 0.01%.
The deadline to convert these Compulsorily Convertible Preference Shares (CCPS) into shares was March 19 this year, but the same could not be executed in view of SEBI’s order in October 2014 banning DLF and six executives from capital market for the next three years. The SEBI order was quashed yesterday by Securities Appellate Tribunal (SAT).
In late 2009, DLF had announced merger of its subsidiary DLF Cyber City Developers Ltd (DCCDL) with promoter firm Caraf Builders & Constructions, the holding company of DLF Assets.
DCCDL had then issued CCPS) worth Rs 1,597 crore to promoters.
Post-conversion of CCPS into ordinary shares, promoters would have 40 per cent stake in DCCDL, which holds bulk of the DLF’s commercial assets. DLF has about 30 million sq ft of commercial area with an annual rent of about Rs 2,000 crore.
"The CCPS Holders have conveyed in writing to the DCCDL Board and informed the Independent Directors, KN Memani and DV Kapur that they are agreeable to defer conversion of the CCPS until March 18, 2016 and also to reduce the coupon rate on the CCPS from 9 per annum to 0.01 per cent per annum for the period of the extension," DLF said in a filing to the BSE.
"100 per cent of the CCPS Holders of DCCDL and 100 per cent of the equity shareholders of DCCDL have agreed to the variation in terms of the CCPS," it added.
Promoter group firms Buland Consultants and Investments Pvt Ltd, Rajdhani Investments & Agencies Pvt Ltd and Sidhant Housing and Development Company, which hold 15,96,99,9999 (9 per cent) CCPS of DCCDL (whose 100 per cent equity/voting capital is held by DLF), had sought clarification on the way forward as the deadline was March 19, 2015 for conversion.
In view of the same, a notice to convene Audit Committee and the Board was issued on March 5 to consider the matter.
The promoters decided to defer the conversion of CCPS following the recommendations made by the audit committee as well as DLF’s board.
In August last year, DLF had said that the Audit Committee chaired by KN Memani would evaluate, review and recommend various strategic options to drive sustainable and long-term growth and development to the rental business.
The audit committee was also asked to create the optimum structure for rental business in order to improve efficiency and control and to reduce conflicts of interest, if any, inter-se affiliated persons/entities in keeping with best corporate governance practices.
"The Audit Committee consistent with this mandate and considering the effect of the uncertainty created by the order of the SEBI felt constrained to make a comprehensive suggestion to the Board," the filing said. .
Therefore, the audit committee suggested the DLF promoters to defer the compulsory conversion of the CCPS by a period of one year and also reduce the dividend coupon rate, the filing said.
The panel’s recommendation was made to facilitate the consolidation and development of rental business of the company without causing a conflict of interest by virtue of compulsory conversion of the CCPS which would result the CCPS holders (promoters) holding 40 per cent equity shareholding in DCCDL, it added.
DLF’s board, on the basis of the recommendation of the Audit Committee, suggested to the promoter directors who are also directors on the Board of the CCPS Holders, the proposal to defer conversion of the CCPS for a period of one year and reduce the dividend coupon rate of the CCPS.
"In view of the urgency, the Board requested the promoter group companies to consider the suggestion on the same date in view of the proximity of the compulsory conversion date of the CCPS," the filing said.
DLF has a land bank of about 295 million square feet, of which 50 million square feet is under development.
Recently, the company has announced it will launch two Real Estate Investment Trusts (REITs) to monetise the office and retail assets.