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DLF Ltd
Asset monetisation kicking off
DLF's deleveraging strategy has kicked off well with successful plot sales in New
Gurgaon and positive newsflow on IT parks monetisation. We expect a gradual
recovery ahead and see limited downside post the 21% stock price correction in
the last 3M and as interest rates appear to be peaking out.
Deleveraging strategy kicking off well...
! After a disappointing performance in FY11 due to slower churn and higher interest cost due to
huge debt, DLF is now focusing on faster asset monetisation and debt reduction. Focus on
plotted development and non-core asset monetisation forms the pillars of this new strategy.
Channel checks suggest that DLF was successful in its New Gurgaon (sector 90-91) plot
sales which were launched yesterday. The plots were offered at 5% discount to the launch
price - thus at a net price of Rs38,000/sq yard (basic selling prices, BSP) and is offered in 3
sizes - 300/ 400/ 500 sq yard. We estimate the total value of these plots could be about
Rs6bn-7bn and could contribute Rs3bn and Rs1.5bn to 1QFY12's revenues and earnings
respectively.
! The Economic Times today reported that DLF is in talks to sell its IT Parks in Noida and Pune
(DLF holds 70% in each) for Rs13bn. Our discussions with real estate PE players suggest
that there is a demand for low yielding IT park assets which augurs well for DLF.
... but more needs to be done to achieve significant reduction in debt
! DLF's large debt burden (Rs225.6bn as of end-FY11, +40% yoy) has been the largest
overhang on the stock, in our view. Its net cash from operations in FY11 at Rs26bn was just
about adequate to cover its debt servicing commitments of Rs25.6bn. We expect plotted
development to generate gross cashflows of Rs25bn in FY12 and expect debt to start
reducing from 2Q. But much more needs to be done to make a reduction in its huge debt.
DLF is therefore aggressively pursuing non-core asset monetiaation (Aman Resorts, hotel
land, IT parks in non-strategic locations) guiding to Rs70bn of such sales in the next few
years.
We expect a gradual recovery ahead
! We expect a gradual recovery ahead and see limited downside post the 21% stock price
correction in the last 3M and as interest rates appear to be peaking out.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
DLF Ltd
Asset monetisation kicking off
DLF's deleveraging strategy has kicked off well with successful plot sales in New
Gurgaon and positive newsflow on IT parks monetisation. We expect a gradual
recovery ahead and see limited downside post the 21% stock price correction in
the last 3M and as interest rates appear to be peaking out.
Deleveraging strategy kicking off well...
! After a disappointing performance in FY11 due to slower churn and higher interest cost due to
huge debt, DLF is now focusing on faster asset monetisation and debt reduction. Focus on
plotted development and non-core asset monetisation forms the pillars of this new strategy.
Channel checks suggest that DLF was successful in its New Gurgaon (sector 90-91) plot
sales which were launched yesterday. The plots were offered at 5% discount to the launch
price - thus at a net price of Rs38,000/sq yard (basic selling prices, BSP) and is offered in 3
sizes - 300/ 400/ 500 sq yard. We estimate the total value of these plots could be about
Rs6bn-7bn and could contribute Rs3bn and Rs1.5bn to 1QFY12's revenues and earnings
respectively.
! The Economic Times today reported that DLF is in talks to sell its IT Parks in Noida and Pune
(DLF holds 70% in each) for Rs13bn. Our discussions with real estate PE players suggest
that there is a demand for low yielding IT park assets which augurs well for DLF.
... but more needs to be done to achieve significant reduction in debt
! DLF's large debt burden (Rs225.6bn as of end-FY11, +40% yoy) has been the largest
overhang on the stock, in our view. Its net cash from operations in FY11 at Rs26bn was just
about adequate to cover its debt servicing commitments of Rs25.6bn. We expect plotted
development to generate gross cashflows of Rs25bn in FY12 and expect debt to start
reducing from 2Q. But much more needs to be done to make a reduction in its huge debt.
DLF is therefore aggressively pursuing non-core asset monetiaation (Aman Resorts, hotel
land, IT parks in non-strategic locations) guiding to Rs70bn of such sales in the next few
years.
We expect a gradual recovery ahead
! We expect a gradual recovery ahead and see limited downside post the 21% stock price
correction in the last 3M and as interest rates appear to be peaking out.
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