DLF looks to develop new land assets as cash flows improve
most valuable real estate firm DLF Ltd is planning to return to Hyderabad and Chennai, stepping out of its home market of National Capital Region (NCR), to develop new office and residential projects, a top executive said. The move follows the company achieving breakeven in operating cash flow in the June quarter.
After nearly eight quarters of spending more than cash inflows, DLF expects to start generating free cash flows from the December quarter. In the medium term, it will invest some of this into new projects.
The company is planning to build office space in the two cities, apart from select residential projects, DLF group chief financial officer Saurabh Chawla said in an interview. In Hyderabad, it plans to develop 2.5 million sq. ft of commercial office as part of its special economic zone. It also plans to develop a mid-income residential project with a local developer.
In Chennai, DLF already has a special economic zone (SEZ) and will construct an additional 1 million sq. ft of office space. After long negotiations, a 5.56 acre plot in Chennai that DLF had bought from the Madras Race Club (MRC) for ₹360 crore this year, recently got permission to be converted from leasehold to freehold. DLF plans to build a mixed-use project combining office and retail space on it.
“DLF has taken a pragmatic approach and in 2018-19, we set upon ourselves certain balance sheet metrics in terms of debt and cashflow management. In terms of free cash flows, the plan is to invest 50% of it towards developing new assets, both commercial and residential. However, we are not getting into a land buying spree,” Chawla said.
Office space in Hyderabad and Chennai, once built, will be transferred to DLF Assets Ltd (DAL), which is now a part of its rental arm DLF Cyber City Developers Ltd (DCDDL), as per an earlier agreement.
DLF is also in talks with private equity funds to raise around ₹750 crore to make certain payments with a 11.76 acre land it bought earlier this year from Haryana State Industrial and Infrastructure Development Corp. (HSIIDC) for around ₹1,500 crore. The land, which is close to DLF Cyber City, was a strategic purchase for the developer which wants to form an equal equity shareholding partnership with an investor.