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The man who is fixing DLF

By Arun Kumar in New Delhi
April 20, 2009 11:04 IST
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In the good old days, the joke was that real estate firm DLF Limited's owner K P Singh, and later his son Rajiv, was a Damn Lucky Fellow.

Today, with so many real estate firms nearly bust, what's most important for the beleaguered group is Delivering Liquid Funds; and the man whose primary job that is in DLF today is its CFO Ramesh Sanka.

In October, when the post-Lehman financial crunch was near its worst, DLF had Rs 6,000 crore (Rs 60 billion) of short-term debt, with a maturity of less than a year.

Since sales were declining, and there was no way the group could repay the debt, Sanka got lenders together and managed to convert Rs 5,000 crore (Rs 50 billion) of this into long-term debt at a lower rate of interest. The remaining Rs 1,000 crore (Rs 10 billion) is likely to get converted over the next couple of months.

Thanks to this, DLF has not delayed meeting any of its repayment obligations.

This, of course, could be the least of Sanka's problems, since, right now, he has to work out the modalities of DLF taking over the KP Singh-promoted DLF Assets Limited -- the property-fund DAL, which was given the rights to the rentals of various DLF buildings whose values have declined, owes DLF around  Rs 5,000 crore (Rs 50 billion).

DAL also faces redemption pressure from some of the investors from whom it has raised Rs 5,500 crore (Rs 55 billion) in the form of optionally convertible preference shares.

Under the original plan, DAL was to be listed on February 3, 2008 -- it received regulatory approval in November 2007. But, thanks to the stock markets crashing, it missed the bus by a few weeks. Which is why DLF continues to fund DAL's debt and now needs to find a way out.

Sanka, colleagues say, appears confident, and feels the problem is not insurmountable.

Sanka also initiated the move to exit non-core businesses completely, or bring in majority partners in areas such as the windmill energy project. He was also instrumental in divesting 12 per cent of DLF's equity for Rs 9,200 crore (Rs 92 billion) in June 2007, which helped reduce DLF's debt significantly.

However, ballooning real estate values, and the group's aggressive expansion has seen this debt rise to Rs 15,000 crore (Rs 150 billion).

Though the family controls and runs DLF, Sanka is said to be playing a key role in mapping the group's future strategy -- including the move to, now, construct lower-cost housing.

As he told his colleagues, "It is a trade off between liquidity and profitability. And in a market like this, it is more important to maintain liquidity. The company will earn more profit once the sentiment improves".

Like most CFOs, Sanka has put a lot of emphasis on IT initiatives and ERP implementation, even digitalising the company's vast land bank of 14,000 acres -- when fully built-up, this will translate to a potential 751 million square feet of commercial and residential space.

Not bad for a man who joined the group as late as 2004. Prior to this, Sanka worked for Moser Baer and Bharti Mobitel.

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Arun Kumar in New Delhi
Source: source

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