DLF debt set to spike on higher construction spending, weak sales
Bengaluru: DLF Ltd continued to burn cash on construction spending amid weak home sales in the April-June quarter and anticipates a temporary spike in its net debt level, India’s largest property developer said in a presentation to analysts late on Saturday. DLF’s net debt rose by around Rs802 crore to Rs25,898 crore in the fiscal first quarter compared to the preceding three months.
In the last one year, DLF’s net debt has risen by almost Rs3,778 crore.
“Almost zero incremental sales coupled with outflow for construction activities to accelerate project completions continued to burn cash during the quarter. Operating cash deficit of Rs750 crore per quarter to continue for next 2-3 quarters,” the developer said in the presentation.
In compliance with Real Estate (Regulation and Development) Act, or RERA, DLF halted all sales from 1 May. Given the complexity of issues related to the transition to the a new regime of RERA and the Goods and Service Tax (GST), new sales booking shall get deferred for at least a quarter, DLF said.
Despite the uncertainty and period of transition, the company said it has continued to focus on completion of projects in order to create finished inventory for sale in the future when normalcy returns after two-to three quarters.
“Operating shortfall shall continue due to subdued sales and collections, while construction expense continues. Continued capex in new office complexes and construction spend on residential spend shall result in temporary spike in net debt levels for which financing is already in place,” DLF said.
On Saturday, DLF posted a 58% drop in net profit to Rs109.01 crore in the April-June quarter while its revenue rose marginally by 9% to Rs2,211.24 crore from the year-ago quarter. The decline in net profit in the June quarter is mainly owing to the one-time gain of Rs329 crore from the sale of DT Cinemas to PVR group in the year-ago quarter.
On the much-awaited stake sale in its rental unit, DLF said that it is in the final stages of discussion on the documentation and shall be put up to the “Audit Committee/ Board for final approval”.
In March, DLF had said that its promoters are in exclusive talks with Singapore sovereign fund GIC Pte Ltd to sell 40% stake in DLF Cyber City Developers Ltd. The deal will help it raise an estimated Rs12,000-13,000 crore and significantly reduce its debt.