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DLF (DLF.BO; Rs235.05; 1L)
Takeaways from Mumbai — DLF presented at our India Investor Conference in
Mumbai. Here are the key takeaways.
Whats news — (a) Targeting ~Rs 20-30b debt reduction in FY12 (b)
Disinvestment target of Rs20-30b for FY12- Of the total target of Rs 100b over
next 3-4 years, ~Rs30b has been achieved and rest comprises ~Rs 20b from IT
Parks/SEZs in Pune and Noida, ~Rs 20b from hospitality assets, ~Rs 20b from
land sale in Tier II & III cities (3) ~10-12 msf delivery scheduled in FY12. FY13
should see a similar amount of delivery.
Market Commentary — There is good traction in the residential segment
(volume growth coupled with price increases) across the country except three
locations – Noida (issue of oversupply), Mumbai (approval related issues) and
Hyderabad (political uncertainty). In the commercial segment, rentals could see
some appreciation in FY12 along with stable growth in leasing volumes. Steep
cost inflation in the past months in steel (up 50%), cement (up 50%) and labour
costs (up 25%) have impacted margins as these three comprise ~70% of
construction costs.
Operational Update — (a) ~10msf launch target - majority of plotted
development (Panchkula, Mullanpur near Chandigarh, Gurgaon, Indore,
Lucknow); (b) Focus remains on plotted sales in FY12 as (1) demand is good; (2)
frontended/upfront cash flows; (3) derisks the company from inflation-related
worries on construction costs; (c) Mumbai launch remains uncertain till clarity
emerges on applicable government policies relating to FSI; (d) Rentals are
expected to grow to Rs15b in FY12 (vs Rs 12.6b in FY11) as additional ~3msf
gets leased; (e) No current plans to ramp up on land bank; and (f) No nearmedium
term plans for spinning off the leased assets into a REIT structure.
Looking to reduce debt by ~Rs 20-30b in FY12 — This would be primarily
funded from non-core asset sale proceeds and debt reduction should begin to
take shape after Q1FY12. The company has ~Rs28b/40b due for repayment in
FY12/FY13 respectively. Refinancing, though facing difficulties at the sector level
(especially from public sector banks), is not a worry for the company, albeit at
higher costs. Incremental borrowing is available at ~12.5% for the company (up
50bps compared to six months back
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
DLF (DLF.BO; Rs235.05; 1L)
Takeaways from Mumbai — DLF presented at our India Investor Conference in
Mumbai. Here are the key takeaways.
Whats news — (a) Targeting ~Rs 20-30b debt reduction in FY12 (b)
Disinvestment target of Rs20-30b for FY12- Of the total target of Rs 100b over
next 3-4 years, ~Rs30b has been achieved and rest comprises ~Rs 20b from IT
Parks/SEZs in Pune and Noida, ~Rs 20b from hospitality assets, ~Rs 20b from
land sale in Tier II & III cities (3) ~10-12 msf delivery scheduled in FY12. FY13
should see a similar amount of delivery.
Market Commentary — There is good traction in the residential segment
(volume growth coupled with price increases) across the country except three
locations – Noida (issue of oversupply), Mumbai (approval related issues) and
Hyderabad (political uncertainty). In the commercial segment, rentals could see
some appreciation in FY12 along with stable growth in leasing volumes. Steep
cost inflation in the past months in steel (up 50%), cement (up 50%) and labour
costs (up 25%) have impacted margins as these three comprise ~70% of
construction costs.
Operational Update — (a) ~10msf launch target - majority of plotted
development (Panchkula, Mullanpur near Chandigarh, Gurgaon, Indore,
Lucknow); (b) Focus remains on plotted sales in FY12 as (1) demand is good; (2)
frontended/upfront cash flows; (3) derisks the company from inflation-related
worries on construction costs; (c) Mumbai launch remains uncertain till clarity
emerges on applicable government policies relating to FSI; (d) Rentals are
expected to grow to Rs15b in FY12 (vs Rs 12.6b in FY11) as additional ~3msf
gets leased; (e) No current plans to ramp up on land bank; and (f) No nearmedium
term plans for spinning off the leased assets into a REIT structure.
Looking to reduce debt by ~Rs 20-30b in FY12 — This would be primarily
funded from non-core asset sale proceeds and debt reduction should begin to
take shape after Q1FY12. The company has ~Rs28b/40b due for repayment in
FY12/FY13 respectively. Refinancing, though facing difficulties at the sector level
(especially from public sector banks), is not a worry for the company, albeit at
higher costs. Incremental borrowing is available at ~12.5% for the company (up
50bps compared to six months back
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