DLF Q3 net slips, cautious on outlook

DLF Q3 net slips, cautious on outlook

Mumbai: DLF Ltd said it was cautious on the near-term outlook as rising interest rates could weigh on demand after the top-listed Indian real estate firm reported a marginal drop in quarterly earnings.

Property prices in major cities like Mumbai and Delhi have more than doubled over the past 18 months, spurred by rising incomes and a strong stock market, but sales volumes are down by a third from a year ago as high prices and rising borrowing costs deter buyers.

New Delhi-based DLF said late on Monday consolidated net profit fell to Rs466 crore ($102 million) in its fiscal third-quarter ended December from Rs468 crore a year ago.

The company posted consolidated revenue of Rs2,594 crore for the quarter ended 31 December, 2010, an increase of 21% from Rs2,151 crore in the same period in the previous fiscal.

EBIDTA stood at Rs1,292 crore, an increase of 33% as compared to Rs969 crore in the corresponding period last year. Net profit stood at Rs466 crore, as compared to Rs468 crore in third quarter in FY2010.

The Reserve Bank of India (RBI) last week raised interest rates for the seventh time since March, to curb stubbornly high inflation, and mortgage rates are expected to move into double-digits.

The RBI had also tightened loan rules late last year by asking mortgage firms to limit loans to 80% of the asset value.

“With inflation becoming a serious concern and due to the inadequate supply side measures, it is feared that overdependence on monetary policy alone to bring inflation to reasonable levels could result in a sharp deceleration in economic growth," DLF said in a statement.

Rising land prices have also added to developers’ costs. DLF said it expected its housing projects volumes to grow but would not hesitate to moderate volumes if needed, as it focuses on protecting margins.

HSBC Securities last month downgraded DLF and second-ranked listed property firm Unitech saying it expected the companies to miss their volume outlook for the year to March 2011 and issue conservative guidance for the next fiscal year.

Ahead of the results, shares in DLF, which is valued at about $8 billion, closed 0.4% higher on Monday in a Mumbai market that fell 0.4%.

DLF shares fell nearly 20% in 2010, underperforming about 17% rise in the main index. The real estate sector index lost more than a quarter of its value in 2010.

Devesh Chandra Srivastava also contributed to this story