DLF debt set to rise as cash flows dry up on slow sales


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 around Rs750-1,000 crore per quarter. Delay in closing a large stake sale in its rental unit, which is expected to raise about Rs12,000-13,000 crore and will significantly bring down its debt levels, has added to the firm’s woes. The transaction involves promoters selling a 40% stake in its commercial property arm, DLF CyberCity Developers Ltd, 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 Rs1,257 crore to Rs24,397 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 2-3 quarters, we expect it to take longer for the secondary markets to pick up, and primary markets should follow,” said DLF’s group chief financial officer Ashok Tyagi in the analyst call on Wednesday afternoon.

On Tuesday, DLF said its fiscal third-quarter profit fell 46% to Rs98.14 crore from the year-ago period. Revenue also fell 30% to Rs2,057.92 crore during the three months ended 31 December.

On the stake sale, 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 multi-jurisdiction 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 Rs3,500-4,000 crore on construction to finish these projects. Its unsold inventory, at current prices, is estimated at around Rs14,000 crore.

“While we do have a couple of (project) sites ready for launch, do we want to launch and add to this overhang of inventory,” Tyagi said on the call. The only project that it may launch in another 2-4 quarters is in Delhi in partnership with GIC. In 2015, DLF and GIC entered into a joint venture to invest in two upcoming projects in central Delhi, where the latter would invest about Rs1,990 crore and DLF would develop the projects.

“The operating cash flows are weak but if the transaction goes through, then it will turn around things for the company. The good thing is that the management indicated that the deal is progressing well,” said Adhidev Chattopadhyay, analyst, Emkay Global Financial Services Ltd.