DLF TO EXIT PRUDENTIAL FINANCIAL JOINT VENTURE

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INDIA’S largest realty firm is selling its entire stake in DLF Pramerica to overseas partner Prudential Financial, thus exiting the mutual funds altogether to focus on its core business.

Prudential Financial (PFI) is expected to buy DLF’s entire 39% stake in the asset management company that is yet to start operations. The move is in line with DLF’s decision to focus on its core assets and move out of its non-core business, a person close to the matter said.

Both DLF and PFI refused to comment on the development.

The PFI Group is likely to buy out DLF’s existing stake at par value to take full control of the asset management company. It is difficult to put a value to the transaction as the equity structure of the AMC is not known.

In 2008, the stock market regulator Securities and Exchange Board of India (Sebi) had granted ‘in-principle approval’ to PFI, to set up an asset management company.

Both the companies had indicated to invest $45 million over the next few years, and provide investment management operations for both retail and institutional clients.

The real estate major is looking at all avenues to reduce its debt, which at present is more than around Rs 12,000 crore.

DLF in the last one year has been exiting from all its non-core businesses. The company has already sold assets worth Rs 1,200 crore, including its stake in the joint venture with Ackruti City.

It is also said to be looking to exit from its international luxury hotel chain Aman resorts and its wind energy business. It is expected to raise around Rs 6,000 crore from sale of these assets and other non-core businesses.

However, an official from the Pramerica, the brand name used in India by Prudential Financial, said that DLF was exiting from the venture because of the new proposed regulatory changes under the new Sebi Mutual Fund Regulations.

"In the current structure, PFI is the sole sponsor and DLF is the finance partner. Under the new guidelines, DLF would require to apply for approval as sponsor, for which it is not eligible,” the official said requesting anonymity. As per the new mutual fund guidelines, any company that does not have a five year track record in financial services is not eligible to apply to Sebi as a sponsor for a mutual fund. However, the life insurance joint venture of the two groups, DLF Pramerica Life Insurance, will continue to operate as per plans. DLF holds 74% stake in the life insurance venture.

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