New Delhi: India’s largest real estate firm by market value, DLF Ltd, will be able to raise only half of the targeted Rs5,500 crore this fiscal—by selling assets that are not central to its business of developing property.
DLF is selling non-core assets to reduce debt. The company’s net debt for the quarter ended 31 December went up by Rs695 crore to Rs12,830 crore, compared with Rs12,135 crore in the preceding quarter. The realtor’s net debt to equity ratio is 0.5.
In an analyst presentation published on the company’s website, DLF has said that it will raise around Rs1,250 crore from asset sales and refunds by the end of the fiscal. This will take the total amount raised from asset sales during the fiscal to around Rs2,500 crore.
The remaining amount of Rs3,000 crore would be raised in the next fiscal. In the third quarter DLF raised around Rs170 crore from sale of non-core assets.
DLF’s gross debt on 1 October was Rs14,729 crore. While it repaid Rs444 crore out of this during the third quarter, the company also borrowed an additional Rs2,703 crore. Also, its debt increased by Rs180 crore due to consolidation in its business, which has led to an increase in net debt.
In an analyst call on Thursday, Saurabh Chawla, executive vice-president, finance, said, debt had gone up as the firm was investing to conslidate its business, including an investment of Rs200 crore to buy out UK-based construction company Laing O’Rourke’s stake in the DLF-Laing O’Rurke joint venture.
Realty hit: A file photo of DLF’s Belaire project, Gurgaon. Revenue is down 20% as realization in Gurgaon projects is less than that in Delhi. Rajkumar / Mint
DLF had tied up with Laing O’Rourke in a 50:50 joint venture in 2006 to undertake projects worth Rs5,000 crore by 2010.
Chawla also said the progress in sale of assets has been slow because the company wanted to get a fair value for its assets. “There is no rush or compulsion to sell at distress prices.”
DLF is still in talks with the Delhi Development Authority for refund of Rs900 crore after it withdrew from a project to develop a convention centre in Dwarka, it said. Besides this, the developer is considering an offer of Rs1,000 crore for the sale of its wind power business.
“DLF had a very aggressive target of asset sales,” said Bhaskar Chakraborty, an analyst with brokerage India Infoline Ltd. “In the worst case scenario, around three-fourths of the asset sales target will be postponed to the next fiscal, and in the best case scenario, half of the asset sales will be delayed.”
DLF reported third quarter results on Wednesday. Its revenue increased by 43% to Rs2,152 crore from Rs1,503 crore a year ago. Net profit fell by as much as 30% to Rs468 crore from Rs 671 crore in the year-ago quarter.
DLF Assets Ltd contributed to 10% of DLF’s revenue in the quarter ended 31 December. In the previous quarter, DLF announced the integration of its wholly owned subsidiary DLF Cyber City Developers Ltd with Caraf Builders and Constructions, a promoter owned company which in turn owns DLF Assets. DLF Assets buys and holds completed commercial assets of DLF. After the integration, the relationship between DLF and DLF Assets will remain unchanged, Chawla said, adding that the decline in profit was because of a lower revenue realization from sales.
“Revenue realization in the third quarter is down by 20% compared to the second quarter,” Chakraborty said. “Last quarter, they were realizing from Capital Greens project which is selling at around Rs8,400 per sq. ft. Realization in Gurgaon projects is far less than Delhi projects.”
DLF’s share price rose 2.37% to Rs324.55 on the Bombay Stock Exchange on Thursday.