Low sales and cash crunch: DLF to add more debt
BENGALURU: India’s largest property developer DLF Ltd expects debt to shoot up owing to muted sales and collections that will persist for a few quarters and lead to a shortfall in operating cash flows.
In an analyst presentation, the company estimated the shortfall at ₹750-1,000 crore per quarter.
Delay in closing a large stake sale in its rental unit, which is expected to raise ₹12,000-13,000 crore and will significantly bring down its debt levels, has added to the company’s woes.
The transaction involves promoters selling a 40% stake in DLF’s commercial property arm, DLF CyberCity Developers Ltd (DCCDL), to institutional investors. The transaction, with the promoter infusing the sale proceeds in DLF and a subsequent equity raising, will help ease the concern on DLF’s debt. DevCo, its residential development arm, will become significantly deleveraged or debt-free.
In the December quarter, DLF’s debt rose by ₹1,257 crore to ₹24,397 crore.
“The company’s performance in the December quarter was lacklustre due to certain events. Though it is being said that sales will pick up in the next two to three quarters, we expect it to take longer for the secondary markets to pick up, and primary markets should follow,” DLF’s group chief financial officer Ashok Tyagi said in the analyst call on Wednesday afternoon.
On Tuesday, DLF said its fiscal third-quarter profit fell 46% to ₹98.14 crore from the year-ago period. Revenue also fell 30% to ₹2,057.92 crore during the three months ended December 31.
On the stake sale transaction, DLF said discussions with shortlisted investors are at an advance stage and will shortly be presented to a committee of independent directors for evaluation and a final decision.
“Given the size and complexities of the transaction and multijurisdiction of properties across the country, the progress has been a bit slow,” DLF said in the presentation.
Blackstone Group LP and Singapore’s sovereign wealth fund GIC Pte. are the two potential bidders shortlisted to buy the stake in DLF’s rental portfolio, Mint reported earlier.
DLF has around 22 million sq ft of under-construction projects and it expects them to be completed by September 2017. It will have to spend around ₹3,500-4,000 crore on construction to finish these projects. Its unsold inventory, at current prices, is estimated at around ₹14,000 crore.