The Hindu Business Line : DLF Q4 net plummets 93% on demand slump

DLF Ltd’s consolidated net profit fell 93 per cent for the fourth quarter ended March 2009, hurt by reduced demand for property, price resets and suspension of sales to DLF Assets Ltd (DAL).

DAL, promoted by DLF Chairman Mr K.P. Singh, had been buying commercial assets from DLF, India’s largest real estate company.

Disappearing Demand

The 93 per cent decline in the net profit to Rs 159 crore for the just ended quarter, was sharper than analysts’ expectations. Adjusted for one-time provisions in affiliate businesses, the profits for Q4FY09 would have been higher by another Rs 51 crore.

In a quarter that saw demand evaporate in all segments, residential and commercial, sale and leasing, DLF’s revenue slumped 69 per cent. The street is also looking for clarity on funding of DLF Assets Ltd and cash inflows, which may be disclosed in the analyst call over the next 2-3 days.

For the full year, the net profit plunged 41 per cent to Rs 4,629 crore. This is after adjusting for losses amounting to Rs 163 crore from non-real estate businesses, like DLF Pramerica Life Insurance, hotels and power.

The company had announced price reset amounting to a total revenue impact of Rs 688 crore and profit before tax impact of Rs 302 crore.

The price resets and benefits would translate into goodwill and consumer confidence, said DLF.

DAL REVENUE

During the quarter, the revenue from DAL stood at Rs 322 crore against Rs 1,845 crore in the year-ago period. This implies that the sales to DAL accounted for just over 23 per cent of the company’s overall revenue, compared to 42.2 per cent in the corresponding period previous year.

The company said that DAL shareholders are currently evaluating financing options, which include additional lease rental discounting, private equity and further infusions from DAL shareholders.

“Due to the impact of global slowdown on commercial leasing, the board of DLF Ltd is reviewing the strategic relationship with DAL, based on the fact that in the last quarter DLF had suspended further sales to DAL and by end of the fiscal year has not fully completed the originally proposed volume of delivery,” it said.

The statement did not give the outstanding debt position for DLF for the year ended March 2009. However, during third quarter, the company’s debt was pegged at nearly Rs 13,000 crore.

“The real estate sector bore the brunt of instability and loss of confidence in the local economic environment for last six months. This has, hopefully, stabilised and (is) in line with our earlier projections, real estate sector should start witnessing recovery from the third quarter onwards,” said Mr Rajiv Singh, Vice-Chairman, DLF Limited.

While residential demand is expected to improve, the outlook for the commercial business continues to remain weak given the global cues, DLF said. There has been no material addition in new leasing, but the company had suffered marginal cancellations in some of its existing pre-leased spaces.

During the last few months, DLF converted short-term debt into long-term debt amounting to about Rs 3,000 crore mainly by securitising cash flows. To reduce debt, it has initiated a portfolio review wherein it is looking to exit the non-strategic businesses.

The wind power business – where the due diligence process is on – has met with a “good response from strategic partners”. Similarly, DLF has decided to exit its large township projects in Bidadi and Dankuni. Similar actions are being contemplated for other long gestation projects, including hotels, said DLF.

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More Stories on : Financial Performance | Real Estate & Construction | DLF Ltd | Outlook

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