Over ex­po­sure to one mkt rea­son for DLF’s woes?

HT Estates - - NEWS - Vat­sala Ka­mat feed­back@hin­dus­tan­times.com

NEWDELHI: Premi­um­re­al­ty­de­vel­oper DLFLtd’swoe­sare­far­from over as the dull res­i­den­tial prop­erty mar­ket con­tin­ues to weigh on its per­for­mance. Even af­ter sell­ing some key as­sets a cou­ple of years back to trim its bor­row­ings, DLF’scon­sol­i­dat­ed­net­debt has surged from ₹22,202 crore in FY16 to ₹25,096 crore in FY17.

The key prob­lem is its over ex­po­sure to a sin­gle mar­ket— Gu­ru­gram—where slug­gish sales have led to a huge pile of un­sold res­i­den­tial units.

The 63% de­cline in new sales dur­ingth­eMarchquar­ter­froma year ago led to a sim­i­lar con­trac­tion in the full-year fig­ures, too.

Can­cel­la­tion­sareadding­tothe woes. To­top it all, DLF’s in­ter­est cost out­flow of ₹738 crore was higher than the op­er­at­ing profit of ₹710 crore for the quar­ter.

So, on the one hand, it is stuck with an un­vi­able res­i­den­tial prop­erty in­ven­tory. And, on the other, the huge debt over­hang pre­vents in­fu­sion of funds into new­mar­kets. Ad­dtoth­is­the­fear of the Real Es­tate Reg­u­la­tory Au­thor­ity’s strin­gent norm­sand lack of clar­ity. All this is likely to keep the res­i­den­tial prop­erty mar­ket in limbo for some time.

For­tu­nately, DLF’s rental as­sets are do­ing well, al­le­vi­at­ing theover­all­pain. Bothrental­rates and the pe­riod of lease are im­provin­gandthe­cus­tomer­pro­file is be­com­ing­more­di­ver­si­fied.

The firm is also try­ing its best to con­trol con­struc­tion costs and other mar­ket­ing ex­penses.

But the much-awaited pro­moter stake sale in DLF Cy­ber City De­vel­op­ers Ltd has been hang­ing­fire for sev­eral quar­ters. Thissale woul­dal­le­vi­atethe debt bur­den to a large ex­tent. The stock, there­fore, has­been­trad­ing in aband, ral­ly­ing on­rumour­sof the stake sale and falling, sub­se­quently, as the sale does not fruc­tify quar­ter af­ter quar­ter. For in­stance, when the March quar­ter re­sults failed to im­press­in­vestors or ad­dress any of their con­cerns, the stock plunged 16% in three or four trad­ing ses­sions. The stock has un­der­per­formed the BSE Realty in­dex re­cently.

For now, the prospects for the res­i­den­tial mar­ket are far from rosy. An Edel­weiss Re­search re­port that eval­u­ates the risks to DLF’s earn­ings says that home sales may re­main dull un­til end FY18. In­come from rental as­sets will im­prove­forDLFon­ly­inFY19 when many on­go­ing projects would­be­com­pleted. Thep­a­thetic state of the realty mar­ket also makes it chal­leng­ing for DLF to sell its large land bank.

Op­tions are few and tough. Ei­ther the stake sale or a re­vival in the prop­erty mar­ket is nec­es­sary to pre­vent the firm from sink­ing deeper into the debt trap that it’s al­ready in.

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