New Delhi: DLF Ltd, India’s largest property firm by market value, posted a 4% decline in fiscal second quarter net profit on Friday on a slowing economy, higher construction costs and increased interest rates that reduced demand for new developments.
The company’s net profit fell to Rs1,935 crore in the three months ended 30 September, from Rs2,018 crore a year earlier. Sales rose 15% to Rs3,744 crore, from Rs3,250 crore a year earlier.
After five years of scorching growth, Indian developers are battling a slump in the real-estate market as a slowing economy, choppy financial markets and the rising cost of credit force buyers to put purchases of apartments and houses on hold. Banks have tightened lending to realty projects and buyers.
“Real estate continues to face tight monetary conditions, which has had an impact on the sector,” said DLF, which has Rs14,000 crore of debt. “If restrictive conditions continue, we expect industry outlook to weaken further.”
While the company may be able to protect its margins because of a decline in commodities, volumes may get hit because of the market conditions, the company said.
“Reduction in construction costs with softening of raw material prices will help us maintain our product margins in challenging times,” Rajiv Singh, vice-chairman, said in a statement. “Our efforts are aimed at increasing liquidity and optimizing returns at acceptable levels through appropriate pricing of products offered across different product segments.”
In the second quarter, DLF realized nearly 39% of revenue from a promoter-owned firm called DLF Assets Ltd, and the corresponding contribution to profit before tax was 47%. DLF Assets’ receivables during the quarter were Rs4,800 crore.
Singh said DLF Assets would raise through a combination of debt and equity Rs5,000 crore by March next year. DLF Assets was to raise money through a planned overseas share sale that has been indefinitely postponed.
Unitech Ltd , the country’s second-biggest listed property firm, was also due to report quarterly earnings on Friday, but hadn’t announced its results till the time this edition went to the press. Parsvnath Developers Ltd’s net profit declined 78.7% to Rs 21.90 crore on a 41% drop in revenue to Rs 226.35 crore.
DLF’s earnings were short of analysts’ expectations. The company had been expected to report a net profit of Rs2,030 crore on sales of Rs4,030 crore, according to a Bloomberg survey of analysts.
Shares of the firm, which declared the results after market hours, closed at Rs220.25 each on the Bombay Stock Exchange (BSE), up 8.8%. The stock has fallen 82% from the peak of Rs1,225 seen on 15 January.
Unitech shares fell 3.71% to Rs48.05 on BSE. The stock is down 91% from its record close of Rs538.25 on 2 January.
The 14-member BSE Realty index, which has declined 84.8% since 1 January,.closed up 2,30%.
Bloomberg contributed to this story.