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DLF operating margins not hurt as much as net earnings

DLF operating margins not hurt as much as net earnings
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First Published: Mon, May 04 2009. 12 46 AM IST

Building blocks: A DLF residential building in Gurgaon. The first two quarters of FY09 helped the realtor maintain its Ebitda. Harikrishna Katragadda / Mint
Building blocks: A DLF residential building in Gurgaon. The first two quarters of FY09 helped the realtor maintain its Ebitda. Harikrishna Katragadda / Mint
Updated: Mon, May 04 2009. 12 46 AM IST
New Delhi: India’s top realty firm by market value, DLF Ltd has protected profitability of its operations in the year gone by, despite reporting shrunken revenues and net profits for fiscal 2009, an investor presentation made by the Gurgaon realtor shows.
The firm, which posted a 41% decline in net profit for fiscal 2009, reported only a slight decline in its Ebitda margins at 57% for the 12 months compared with 68% in the previous fiscal.
Building blocks: A DLF residential building in Gurgaon. The first two quarters of FY09 helped the realtor maintain its Ebitda. Harikrishna Katragadda / Mint
Ebitda is short for earnings before interest, tax, depreciation and amortization, and is seen as a measure of profitability of operations at most businesses. Ebitda is calculated as a percentage of revenues.
DLF reported a net profit of Rs4,629 crore for fiscal 2009, down from Rs7,812 crore a year ago, and a 28% decline in its revenue to Rs10,541 crore from Rs14,684 crore in fiscal 2008.
The Ebitda for fiscal 2009 seems to have been kept up mostly due to the performance of the quarters earlier in the year. “Margins have not fallen as much as net profit because the first two quarters of the year contribute more to the year-end results than the last two,” said an analyst from an Indian brokerage, asking he or his employer not be identified. “DLF had a higher margin in the first half of the year so the weighted average (for the whole year) is higher.”
In the fourth and final quarter to 31 March, DLF showed an Ebitda margin of 28% compared with 60% in the December quarter, according to the company presentation, based on which DLF top management answered analyst queries on Saturday.
The drop in Ebitda margins in the fourth quarter, the company said, was because of a significant reduction in margins from DLF Assets Ltd, or DAL, a promoter-owned company that buys finished assets from DLF, a shift to affordable housing and a one time price correction to existing buyers.
Senior executives at DLF were not immediately available for comment on Sunday.
DLF has also changed its debt profile from short to long term. As on 31 March, DLF had a gross debt of Rs16,358 crore, of which Rs3,591 crore is due for payment in fiscal 2010.
The firm is in the process of raising a fresh long-term loan of Rs2,500 crore (to replace the short-term debt), some of which has been sanctioned and the rest is under disbursal, it said in the presentation.
The company has securitized its future rents to pay its short-term debt obligations, and since October, has raised Rs2,758 crore in such loans. Rent securitization is the securitization of future rent receivables, under which a developer pledges its future rentals from a commercial space to a bank that disburses a loan against the rent receivables.
As part of its debt reduction strategy, DLF plans to raise Rs5,500 crore by “unlocking or disposal of non-core assets” which do not have any short- to medium-term utilization. The sale of assets worth Rs3,500 crore is under way while the company is trying to raise additional Rs2,000 crore through the sale of such assets, DLF said in its presentation.
DLF said it will raise Rs900 crore through the sale of its wind power business. The company says that it has already received Rs336 crore from the state governments after it exited from township projects in Bidadi, Karnataka and Dankuni, West Bengal.
The firm expects to receive Rs850 crore on exit from a convention centre project in New Delhi. DLF also plans to exit from hotels and other long gestation period projects.
The company has so far handed over 5.1 million sq. ft of space to DAL, and expects the balance leasing to be slow. Under the agreement, DLF has to deliver 13-14 million sq. ft of space to DAL.
DLF has said in its presentation that the company is in talks with private equity investors and is looking at other modes of funding for DAL to repay DLF. As on December, DAL owes around Rs5,500 crore to DLF towards payment for the space handed over to DAL. DLF has not given an updated figure on the receivables from DAL.
DLF expects around Rs2,000 crore from DAL through the lease rental discounting or rent securitization method, the company said.
shabana.s@livemint.com
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First Published: Mon, May 04 2009. 12 46 AM IST
More Topics: DLF | Real estate | Ebitda | DLF Assets Ltd | DAL |