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CCI orders second probe against DLF; realtor’s net debt goes up in Q3, PAT declines

10 February, 2015

Fair trade watchdog Competition Commission of India (CCI) has issued second probe against the country’s largest public listed real estate developer DLF Ltd in the last two days for allegedly exploiting its dominant market position in Gurgaon.

The order relates to abuse of dominant position in development and sale of residential units by DLF Universal Limited at its project The Skycourt located in Sector 86, DLF Gardencity, Gurgaon.

In an order dated February 5, 2015, the commission has noted that it is prima facie of the opinion that DLF’s conduct appears to be in contravention of the provisions of law.

Accordingly, the commission has directed the Director General (DG) to launch an investigation into the matter and to complete the investigation within a period of 60 days from receipt of the order.

Meanwhile, on Monday the commission had ordered a probe against the developer on similar charges.

This case related to alleged one-sided clauses in the buyer’s agreement with respect to apartments in the residential township Regal Gardens at DLF Garden City in Gurgaon.

In an order dated February 4, 2015, CCI noted that some of the terms of the ‘Agreement’ seems onerous and one-sided and clearly depicts how DLF New Gurgaon Homes Developers has misused its dominant position to mould the impugned clauses of the ‘Agreement’ in its favour.

The realtor had come under the scanner of watchdog in the past too. CCI had slapped a Rs 630 crore penalty on the realtor for violating fair trade practices in 2011. This was later challenged by DLF in the Supreme Court. The apex court had last year upheld the case against the developer.

Quarterly result

 DLF continues to struggle with debt on its books with its net debt rising to Rs 20,337 crore in the quarter ended December 31, 2014 as against Rs 19,944 crore in the previous quarter ended September 30, 2014, according to an analyst presentation of the company.

Its net profit declined 9.29 per cent to Rs 131.79 crore as against Rs 145.29 crore in the same quarter last year.

This was due to lower sales and other income besides higher cost of servicing the outstanding loans.

Both consolidated revenue and EBITDA declined by a fifth to Rs 2,080 crore and Rs 918 crore, respectively, compared to Q3 FY14.

The realtor saw finance cost move up to Rs 648 crore from Rs 633 crore a year ago.

The current attributable net debt to DevCo (development arm) is Rs 6,350 crore and to RentCo (rental arm) is Rs 14,000 crore, the company said in an analyst presentation.

DLF aims to keep the net debt of DevCo in the range of +/- Rs 1,000 crore in the medium term, through tactical divestments and joint ventures.

It also said is it is ready for a large commercial mortgage backed securities (CMBS) of Rs 3,600 crore in its SEZ business to further improve the quality of debt and free cash.

The debt laden firm has been looking at various routes to cut down its existing debt liabilities. It has been selling assets and has also experimented with mortgage-backed securities. In the past it has sold its hospitality and wind power assets as part of divestment of non-core assets. However, those transactions have not allowed the company to make meaningful debt reduction.

In a statement, the company said it has witnessed continued interest from actual users in the super luxury & luxury segment. It expects sales volume of residential products to reach normal volumes in 12-18 months.

“Rental business which is a leading indicator of demand continues to grow at targeted pace. The outlook in the office leasing business is much better given the current demand-supply situation. However, fresh capex to create new capacity will take place once rentals start to reflect the current cost structures,” the company said.

DLF has also reiterated its plan to list its commercial and retail assets under real estate investment trust (REITs). It said it will form two real estate investment trusts to monetise its 30 million sq ft commercial assets.

While the company is firming up plans for REITs, it cannot yet go ahead as it faces a ban from accessing capital market by SEBI over a old case related to lack of appropriate disclosures at the time of its IPO.


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CCI orders second probe against DLF; realtor’s net debt goes up in Q3, PAT declines

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