DLF's board approved the integration of DAL (DLF Assets) with DLF via its fully owned subsidiary DLF Cyber City. Post the merger, DLF will own 60% of the
merged entity (DLF Cyber City + DAL), while remaining 40% in DLF cyber-city will be held by the promoters in lieu of their stake in DAL.
There is limited information on the assumptions for valuations and total land assets under Cybercity developers. However, assuming an equity value of Rs 47B for DAL (based on our DCF valuation), the swap ratio then values Cyber city developers at Rs 70B. The leased portfolio of DLF cyber city is worth Rs 67B (based on Rs 60psf average rent for office and Rs 200 psf for retail). This will leave additional Rs 3B to be attributable to land assets and liabilities.
Just purely going by above logic, the transaction looks reasonable to shareholders of DLF.
The deal now consolidates all the rental assets under one company and eliminates future DAL sales and related party transaction issues. It also aligns the interest in rental assets of DLF with promoters.