The country’s largest realty firm DLF Ltd has more than doubled its targeted non-core asset divestment plan for the current financial year ending March, 2012. It now stands at $2.2 billion (Rs 10,000 crore), compared to the earlier target of asset sales to mop up around $1 billion (Rs 4,500 crore) this fiscal.
Analysts see this as crucial for the company to get back in shape as the firm is already loaded with a huge debt pile. DLF has been looking to cut its debt but has been unsuccessful. The net debt increased to Rs 21,424 crore ($4.7 billion) as of March 31, 2011, compared to Rs 20,872 crore on December 31, 2010.
Cost of servicing this huge debt is already weighing on its earnings, even as consolidated revenues (sales and receipts) rose 34.5 per cent in the fourth quarter to Rs 2,683 crore. Consolidated net profit, however, shrunk 19.2 per cent to Rs 344.5 crore over the fourth quarter in the previous fiscal.
The company’s major non-core businesses brought in a profit of Rs 11.8 crore last quarter. This includes a loss of Rs 21.28 crore from its insurance business DLF Pramerica Life Insurance Company, made up by Rs 33 crore profit brought in by the hotel business during the fourth quarter.
The company has been facing grim earnings prospects, both from hit on margins and an anticipated slowdown in demand for new residential houses, as asset prices have bounced back strongly from the levels three years ago during the credit crisis.
The company’s expenditure related to cost of land, plots, development rights and constructed properties rose almost threefold during the last quarter over the year-ago period. Finance charges also shot up over 44 per cent during Q4 FY2011, with the finance expenses pegged at around $100 million for the three months ended March 31, 2011.
The firm posted a net profit of Rs 1,639.6 crore for the year ended March 31, 2011, as compared to Rs 1,719.8 crore the year ago. Revenues rose almost 29 per cent to Rs 9,560 crore for the full year.
The results clearly did not appeal to investors who dumped the shares of the company to the lowest level in at least one year. The share price closed at Rs 210.1, down 4 per cent on Wednesday.
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