DLF struggles to cut debt, Q1 net falls 18%

Shares in DLF, India's biggest real estate developer, traded higher in-line with the broader BSE realty index Tuesday.

At 11 a.m., the stock traded 1.3 per cent higher at Rs 214 on the BSE. The shares, up 15.4 per cent this year, are lagging a near-21 percent gain in the real estate index.


The company reported little success in paring high debts and posted an 18 per cent drop in first-quarter net profit on Monday, hit by high interest and slowing home sales.

Like other developers, DLF gorged on cheap finance during the 2007-08 property boom to fund ambitious expansion plans for millions of square feet of homes, offices and malls.
Now it is struggling to reduce its borrowings of Rs 22,700 crore as of the end of March and improve profitability as buyers, burdened by high inflation and interest rates, hold off on purchases.

The Delhi-based developer managed to sell Rs 1,770 crore worth of non-core assets against a target of Rs 5,000-6,000 crore by March and offloaded just Rs 370 crore worth in the first quarter after setting a new target of Rs 10,000 crore of divestments in the medium term.

Assets it failed to sell included the global hotel chain Aman Resorts, which stalled in January after DLF received lower-than-expected bids, a plot of land in Mumbai which private developer Lodha is close to buying, and its wind turbine business.

Finance costs, up 26 per cent at Rs 620 crore, ate into consolidated net profit of Rs 293 crore for the quarter ended June, compared with Rs 358 crore a year ago.

Revenue was down 10 percent at Rs 2,200 crore.

Analysts on average expected the company to post net profit of Rs 286 crore on revenue of Rs 2,470 crore, according to Thomson Reuters I/B/E/S.

In 2011, home sales in the New Delhi region, DLF's biggest market, were down 20 per cent by volume, according to consultant Jones Lang LaSalle India's Real Estate Intelligence Services.


(Copyright Thomson Reuters 2012)