DLF’s net debt climbs up again; looks to rope in PE investors for projects

India's top real estate developer by market capitalisation, DLF Ltd continues to see a debt overhang with the firm reporting an increase in net debt to Rs 20,965 crore as of March 31, 2015 as compared to Rs 20,337 crore as of December 31, 2014, according to an analyst presentation by the company.

The latest attributable net debt to DevCo (the development arm) is Rs 6,965 crore and to RentCo (rental arm) is Rs 14,000 crore, it disclosed on Thursday along with its financial results.

Even though it has sold a slew of non core assets and even experimented with mortgage-backed securities to bring down debt over the years, its net debt continues to hover around Rs 20,000 crore mark. It has sold its hospitality, insurance and wind power assets as part of divestment of non-core assets over the last two years.

Following the sale of luxury hotel chain Aman Resorts, the company had targeted to bring down its net debt level in the range of Rs 17,500 crore but had missed the target. It had managed to bring it down to Rs 18,526 crore as of March 31, 2014 but the debt has got pushed up thereafter.

“Due to continued softness in most micro markets, the net debt attributable to Devco has increased in short term. Target remains to maintain and reduce Devco debt through improvement in operating/recovery cash flows and investments by PEs at the project level,” it said in the presentation.

Now, it is looking at other avenues to reduce debt, chief among which is setting up of REITs. It has set up a committee of independent directors and hired investment banks - JP Morgan and Morgan Stanley to help it set up REITs. It aims to monetise almost 30 million sq ft of assets across commercial and retail to recycle capital for growth, increasing ROE's and reduce debt of the company, DLF has disclosed.

According to the analysts presentation, it is also exploring options to tie up with strategic investors for setting up joint ventures at the project level for its residential business to keep debt at manageable and comfortable levels.

The group posted a net profit of 171.62 crore for the quarter ended March 31, 2015 as compared to Rs 219.68 crore for the quarter ended March 31, 2014. Its total income from operations fell marginally to Rs 1,953.69 crore from Rs 1,969.45 crore in the same period.

For the full year, its net profit declined to Rs 540.24 crore from Rs 646.21 crore in the year-ago period. Its total income from operations declined to Rs 7,648.73 crore last fiscal from Rs 8,298.04 crore in the 2013-14 financial year.

DLF said that the property market will take another twelve months to see sales momentum improve and the key factors would be reduced interest and GDP growth rate.

DLF share price rose 0.73 per cent to end at Rs 124.25 each on the BSE in a flat Mumbai market on Thursday.

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