New Delhi: India’s largest real estate firm, DLF Ltd, which reduced net debt by a mere Rs 33 crore in the fourth quarter of last fiscal—borrowings still stand at a staggering Rs 22,725 crore—plans to reduce it significantly by divesting non-core assets and selling around 12 million sq. ft of residential space to raise Rs 4,000 crore and Rs 6,500 crore, respectively.
Announcing this, the company’s executive vice-president, finance, Saurabh Chawla, said during a presentation to analysts on Thursday that the company would likely announce the closure of three divestment deals in the first half of the current fiscal: its hotel business, Aman Resorts; a prime plot in Mumbai; and the wind energy business.
“The company has a mandatory debt repayment of Rs 3,900 crore within this fiscal,” he said. “Of this, a significant portion has already been paid.”
According to the presentation, DLF plans to reduce debt through “strengthening operational cash flows, enhancing momentum on non-core divestments along with a moderation in land aggregation and capex.”
Selling non-core assets at times such as these won’t be easy, said an analyst.
“It will be tough for the company to sell these non-core assets in such an economic environment. The company has been planning to do this for the past three years,” said Sharan Lillaney, Mumbai-based real estate analyst at Angel Broking Ltd.
DLF raised about Rs 1,774 crore in 2011-12 through divestments of non-core assets, including plots and information technology parks. To date, it has raised around Rs 4,844 crore through this method. The company said it would achieve in the medium term the target it has set itself— Rs 10,000 crore from divestments.
According to the presentation, the company has broadly met its business plan targets for fiscal 2011-12.
It achieved gross sales bookings of 13.5 million sq. ft against 10 million in the year-ago period.
The company plans to sell another 12 million sq. ft for an expected realization of Rs 6,500 crore, added Chawla. It will focus on a mix of plotted developments and luxury projects this fiscal, he said.
“Of the total sales realization, around Rs 1,500 crore will come from premium Gurgaon project Magnolias. However, a significant portion of this will be realized in the second half of the year,” Chawla said.
The residential market is likely to stay subdued this year, said Lillaney, “unless the Reserve Bank of India reduces interest rates by 50-75 basis points”.
One basis point is one-hundredth of a percentage point.
On Wednesday, DLF reported a 39% fall in its consolidated net profit to Rs 211.70 crore for the quarter ended 31 March on account of higher interest outgo.
It had posted a profit of Rs 344.54 crore in the year-ago period.
Shares of DLF rose by 0.79% on Thursday to close at Rs 184.80 on the BSE on a day the bourse’s benchmark Sensex lost 0.57% to close at 16,218.53 points.
PTI contributed to this story.