DLF plans to go slow on fresh launches, focus on existing projects

Bengaluru: DLF Ltd, India’s most valuable property developer, is planning to go slow on fresh project launches and focus on finishing existing projects instead, at a time when homebuyers have lost the confidence to invest in under-construction projects, especially in the National Capital Region (NCR).

The company also plans to partially monetize its rental portfolio by bringing in long-term investors, the company said in an analyst presentation.

“The company believes that this is a superior strategy as compared to launching new projects. Once the demand comes back, the company shall be able to sell completed, finished products,” it said.

DLF has been struggling to reduce its debt in recent years. The company’s net debt rose Rs.633 crore in the June quarter to Rs.21,598 crore compared with the preceding three months. Of this, Rs.7,598 crore of debt belongs to its development company (that includes residential projects) and the remaining Rs.14,000 crore to its rental portfolio.

The developer is in talks to bring in private equity investors in certain projects to bring down the debt in its residential portfolio and will also tap banking or capital markets to access long-term debt.

On Thursday, DLF posted a 4.86% drop in net profit to Rs.121.5 crore in the three months ended June, compared with the year-ago quarter. Revenue rose 29.3% to Rs.2,231 crore during the same period.

In the June quarter, DLF sold 0.16 million sq. ft of space for about Rs.1,035 crore compared with 0.38 million sq. ft for Rs.308 crore in the year-ago quarter. The company plans to deliver around 20 million sq. ft of space over the next few quarters, according to the presentation.

DLF said it is hopes to achieve an annual rental income of Rs.2,400 crore by 2015-16 from its RentCo business.

Having created a large platform of rental assets, DLF is looking to partner large, long-term investors and wants to partially monetize the assets through sale of equity.

On 5 August, Mint reported that DLF will seek stockholders’ approval to pledge more than 50% of the company’s shares in three of its profitable rent-generating units to raise as much as Rs.7,500 crore.

The money raised by DLF through pledging its shares in the units, if it indeed chooses to do so, may help the builder reduce its interest burden by replacing costly loans with cheaper funds.