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Fine print
DLF’s FY11 annual report highlights that, at a negative Rs4bn, FCF came
quite close to breaking even. Much of the improvement has come from
improved balance sheet discipline which saw a decline of Rs21bn in size.
Working capital increase at 8% YoY lagged the 29% YoY increase in
revenues. Related party transactions virtually ended in FY11 – an issue
bothering DLF since FY08. Lease asset income rose 74% YoY to 21% of
total revenues – supporting, in part, the high PE that DLF trades at.
FCF improvement YoY, nearing breakeven
DLF’s net debt increased by Rs16.2bn in FY11, Rs12.4bn of which was on
account of premium paid on redemption of Rs41.1bn of preference capital.
The premium was accumulated over the years; adjusting for which DLF’s FCF
was a small net negative of Rs3.8bn – substantial improvement over the
Rs22.0bn of negative FCF seen in FY10. While FY11 saw Rs12.7bn of support
from asset sales; higher asset sales and a shift to faster cash flow plotted
sales should lead to DLF becoming FCF positive in FY12.
Balance sheet shrunk by Rs21bn
Mar’11 balance sheet size of Rs509.0bn is down Rs20.9bn over Mar’10.
Rs12.7bn in asset sales and utilization of cash balance to redeem preferences
helped reduce balance sheet size. Total gross debt, including preference, is
down Rs18.0bn YoY. Though restatement of land bank lead to current assets
and current liabilities both rising materially, the net current assets increased
by only 8% YoY to Rs189bn, slower than the 29% YoY increase in revenues.
Related party transactions have come down
The total sum of related party transactions during the year declined 97% YoY
to Rs1.0bn from Rs30.7bn in FY10. Reduction is a benefit of DAL consolidation
done at FY10 end. The final stage in the DAL consolidation still remains as the
promoters continue to hold Rs16bn of convertible instrument (40% equity
interest) in DAL. DAL consolidation also resulted in share of higher margin
and stable lease asset and associated income to rise 74% YoY to Rs20bn.
Beating guidance key to outperformance
While FY11 led to a visible improvement in DLF’s cash flow profile, an explicit
debt reduction is still missing and remains contingent on its asset sales
program. We build in Rs15bn of FCF generation in FY12 driving a similar
reduction in net debt. A reversal of downward earnings trend will be critical
for the DLF stock to continue its recent outperformance despite the high PE.
Fine print
DLF reported Rs0.3bn of negative cash flow from operations in FY11,
adjusting for Rs12.4bn of premium that DLF paid on preference redemption.
The cash flow includes inflows of Rs12.7bn from asset sales (land
sales/refunds) and Rs11.0bn expenditure on new land purchase. Rs11.3bn
was estimated to be spent on construction of lease assets/capex – slower
than before as DLF focussed on leasing the inventory at hand. We expect
operations to turn cashflow positive from FY12 as customer inflows quicken
post plotted sales. We currently build in Rs10bn of inflows from asset sales; a
higher number can lead to a positive surprise.
Preference redemption major drain on cash
DLF had Rs59.2bn of preference issued on its balance sheet as of Mar’10.
Rs41.1bn of that was redeemed in FY11 with Rs12.4bn of redemption
premium paid on the same. Adjusting for the premium; DLF would have seen
a net debt increase of only Rs4.0bn during FY11 – indicating that operations
had improved substantially in terms of cash generation over FY10.
Currently no preference redemptions are planned for FY12. Though, the
preference of Rs16.0bn issued by DCCDL to promoters can be redeemed at
the insistence of promoters now. We believe a settlement of the issue is likely
only when DAL listing nears.
Lease and maintenance income 21% of total revenue
DLF’s revenues from real estate and related businesses rose 28% YoY as an
increase in plotted and rental revenues more than made up for the removal of
DAL revenues. Rental and associated services income rose 74% YoY to
Rs20bn. They contributed 24% to real estate revenues; up from 17% in
FY10. Contribution of revenues from businesses other than real estate (power
(co-gen and wind), hotels, insurance, and cinema) rose 36% YoY 10% of total
revenues. A proposed selling off of Aman hotel business and Insurance
business will reduce their contribution to revenues by FY13.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Fine print
DLF’s FY11 annual report highlights that, at a negative Rs4bn, FCF came
quite close to breaking even. Much of the improvement has come from
improved balance sheet discipline which saw a decline of Rs21bn in size.
Working capital increase at 8% YoY lagged the 29% YoY increase in
revenues. Related party transactions virtually ended in FY11 – an issue
bothering DLF since FY08. Lease asset income rose 74% YoY to 21% of
total revenues – supporting, in part, the high PE that DLF trades at.
FCF improvement YoY, nearing breakeven
DLF’s net debt increased by Rs16.2bn in FY11, Rs12.4bn of which was on
account of premium paid on redemption of Rs41.1bn of preference capital.
The premium was accumulated over the years; adjusting for which DLF’s FCF
was a small net negative of Rs3.8bn – substantial improvement over the
Rs22.0bn of negative FCF seen in FY10. While FY11 saw Rs12.7bn of support
from asset sales; higher asset sales and a shift to faster cash flow plotted
sales should lead to DLF becoming FCF positive in FY12.
Balance sheet shrunk by Rs21bn
Mar’11 balance sheet size of Rs509.0bn is down Rs20.9bn over Mar’10.
Rs12.7bn in asset sales and utilization of cash balance to redeem preferences
helped reduce balance sheet size. Total gross debt, including preference, is
down Rs18.0bn YoY. Though restatement of land bank lead to current assets
and current liabilities both rising materially, the net current assets increased
by only 8% YoY to Rs189bn, slower than the 29% YoY increase in revenues.
Related party transactions have come down
The total sum of related party transactions during the year declined 97% YoY
to Rs1.0bn from Rs30.7bn in FY10. Reduction is a benefit of DAL consolidation
done at FY10 end. The final stage in the DAL consolidation still remains as the
promoters continue to hold Rs16bn of convertible instrument (40% equity
interest) in DAL. DAL consolidation also resulted in share of higher margin
and stable lease asset and associated income to rise 74% YoY to Rs20bn.
Beating guidance key to outperformance
While FY11 led to a visible improvement in DLF’s cash flow profile, an explicit
debt reduction is still missing and remains contingent on its asset sales
program. We build in Rs15bn of FCF generation in FY12 driving a similar
reduction in net debt. A reversal of downward earnings trend will be critical
for the DLF stock to continue its recent outperformance despite the high PE.
Fine print
DLF reported Rs0.3bn of negative cash flow from operations in FY11,
adjusting for Rs12.4bn of premium that DLF paid on preference redemption.
The cash flow includes inflows of Rs12.7bn from asset sales (land
sales/refunds) and Rs11.0bn expenditure on new land purchase. Rs11.3bn
was estimated to be spent on construction of lease assets/capex – slower
than before as DLF focussed on leasing the inventory at hand. We expect
operations to turn cashflow positive from FY12 as customer inflows quicken
post plotted sales. We currently build in Rs10bn of inflows from asset sales; a
higher number can lead to a positive surprise.
Preference redemption major drain on cash
DLF had Rs59.2bn of preference issued on its balance sheet as of Mar’10.
Rs41.1bn of that was redeemed in FY11 with Rs12.4bn of redemption
premium paid on the same. Adjusting for the premium; DLF would have seen
a net debt increase of only Rs4.0bn during FY11 – indicating that operations
had improved substantially in terms of cash generation over FY10.
Currently no preference redemptions are planned for FY12. Though, the
preference of Rs16.0bn issued by DCCDL to promoters can be redeemed at
the insistence of promoters now. We believe a settlement of the issue is likely
only when DAL listing nears.
Lease and maintenance income 21% of total revenue
DLF’s revenues from real estate and related businesses rose 28% YoY as an
increase in plotted and rental revenues more than made up for the removal of
DAL revenues. Rental and associated services income rose 74% YoY to
Rs20bn. They contributed 24% to real estate revenues; up from 17% in
FY10. Contribution of revenues from businesses other than real estate (power
(co-gen and wind), hotels, insurance, and cinema) rose 36% YoY 10% of total
revenues. A proposed selling off of Aman hotel business and Insurance
business will reduce their contribution to revenues by FY13.
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