DLF: NTC mill land sale to ease debt burden1 min read . Updated: 15 Aug 2012, 01:31 AM IST
Timely divestment of two other large assets, Aman Resorts and wind power business, holds key
Over the last few years, as the real estate market nosedived, DLF’s debt burden kept piling up. Interest costs on its massive ₹ 22,680 crore debt (the June quarter figure) have been eating into profits. A post-results note by Emkay Global Financial Services Ltd said divestments of around ₹ 385 crore during the June quarter will not translate into savings on interest costs. In fact, in the last five quarters, DLF’s gross debt rose by ₹ 1,100 crore in spite of it divesting around ₹ 2,100 crore worth of assets, as the divestments were done in bits and pieces.
The NTC mill land deal will bring relief as the buyer pays ₹ 1,200 crore upfront and the balance ₹ 1,500 crore will be in the form of debt transferred to Lodha Developers from DLF. Analysts say DLF’s debt will come down by around ₹ 2,300 crore as a portion of the sale proceeds get used up towards tax and interest expenses for the current quarter.
The mill land sale will boost sentiment on the Street. But going forward, timely divestment of two other large assets—Aman Resorts and the wind power business—is also important to keep the momentum going. The management has been pointing out that the sale of these three non-core assets should fetch ₹ 5,000-6,000 crore.
This apart, DLF needs momentum in its core business too. The June quarter numbers mirror the harsh reality of the slowdown. Residential sales were at a low of 1.3 million sq.ft., compared with 2.3 million sq.ft. a year ago. Numbers on lease rentals were not inspiring either. Operating expenses and interest outflows together devoured cash flows from operations. And the quarter saw a cash deficit of around ₹ 450 crore.
How soon and to what extent DLF can realize funds from other non-core assets and push up revenue from its core business will determine the company’s valuations.