New Delhi: India’s largest listed real estate developer, DLF Ltd, said its first quarter net profit was Rs1,515.48 crore, the first time it has reported results since going public.
The company reported sales of Rs3,074 crore for the quarter ended 30 June.
There was no year-ago quarterly profit comparison as DLF, which raised more than Rs9,000 crore in June in India’s biggest IPO, did not provide comparable numbers, saying it wasn’t required to do so.
By comparison, in all of fiscal 2006-07 ended 31 March, the company had said it posted a net profit of Rs 1,933.65 crore on sales of Rs 2,634.35 crore.
“If you ask me, much of DLF’s profit (this period) has been on account of sale of commercial property to its promoter company DLF Assets Pvt. Ltd,” said Manish Gunwani, vice-president, Brics Securities.
DLF said it will invest at least Rs10,000 crore every year over the next few years to develop new real estate projects. DLF also said it will focus on hotels, special economic zones (SEZs) and middle-income housing.
“For fiscal 2007, we invested around Rs6,000-8,000 crore,” said Rajiv Singh, DLF vice-chairman. “Profit for this quarter on an annualized basis represents a 300% increase, although figures are not comparable.”
In a January filing with Sebi, India’s stock exchange regulator, DLF said its profits during the eight-month period ended 30 November 2006 rose 853% to Rs1,830 crore from about Rs192 crore in the full 12 months of fiscal 2006. This draft red herring prospectus showed that 75% of the real estate giant’s pre-tax profit, about Rs1,742 crore, came from sales to DLF Assets. Some 65% of DLF’s revenue for the same eight months was accounted for by the same sale of assets.
DLF, along with rivals such as Unitech Ltd, has benefited from India’s real estate boom, where prices have risen as much as 300% in the top metros in as little as three years as economic growth, rising incomes and easier credit encouraged more people to own, rather than rent, homes.
DLF, in particular, purch-ased the bulk of its land bank in the last two decades in outlying areas of Delhi which, over the years it has built into the fashionable suburb of Gurgaon. DLF apartments in Gurgaon now sell anywhere between Rs1 crore and Rs5 crore. Its town houses in Gurgaon can cost nearly double that.
However, DLF said it is now looking at building more affordable houses in 30 cities such as Gurgaon, Chennai, Bangalore, Indore, Chandigarh and Kolkata.
Analysts warned that the move to develop affordable housing may erode some of the higher margins it has enjoyed while it built more high-end spaces. In particular, they expect the company’s earnings before interest, tax deprecation and amortization (Ebitda) to slip.
“DLF’s shift towards middle-income housing could have an impact on their margins because there is lesser realization in the... category,” said Nitin Khandkar, senior vice-president, research, Keynote Capitals Ltd.
“There will be a negative impact on the Ebitda, but given their current numbers, DLF’s Ebitda will still be higher than the rest of the industry.”
Bric’s Gunwani estimates that number at 57.2%. Rival Unitech’s is currently at 60%, Sobha Developers Ltd at 21.6% and Parsvnath Developers Ltd is at 28.8%.
DLF also said it has increased its land bank from 10,255 acres, as stated in its filing, to nearly 13,000 acres, which translates into a development potential of 625 million sq. ft.
Shares of DLF closed on the Bombay Stock Exchange at Rs645.55, up 15 paise, well above their Rs505.60 low of 5 July.