DLF expansion was a Boon, the Size now a Bane

Rapid expansion aided real estate firm, DLF build a brand and scale up during the real estate’s boom phase, but its size has now has become its bane.Positive news on the sales of non-core assets might have helped in supporting the stock at lower levels. However, this has hardly done much to ease the balance sheet pressure and enhance operating cash flows for the firm. Consolidated net debt has surged from Rs.8,526 cr in FY14 to Rs.22,120 cr at the end of June 2016. Paring this down even more requires sales recovery, which is not happening at the pace at which it should. DLF’s June quarter net sales fell by 21 per cent over a year ago. Meanwhile, DLF share price was trading up 2.02 per cent at Rs.156.85 on the NSE today. The stock opened at Rs.155.45 from a previous closing of 153.75. The current market cap of DLF amounts to 27428.20 (Cr) while its book value stands at 153.37.

Quarterly Sales:If we look at the last 8 quarters’ revenue sales, the company seems not in a very good shape. The sales pickup isn’t enough to ease cash flow stress in the coming term. Quarterly sales booked have consistently been low at 0.2-0.9 million square ft. with a downward bias. The June quarter, in fact, had no sales from existing completed projects. Also, Rs.270 cr-worth of legacy bookings was discarded. On top of this, piled up, the huge closing balance of existing projects. Albeit this has been reducing, the company’s June quarter closing balance was 21.9 million square ft. The balance sheet for FY16 pins the inventory at Rs.17,000 cr, which is a grave concern as it is close to twice the annual sales.

The National Capital Region and the DLF Cyber City Developers Limited:The major issue, perhaps, is that the National Capital Region, where the real estate company has a major exposure, is saddled with enormous inventory. DLF is left holding a huge land bank in a region which might not be of much use in the present conditions. Meanwhile, the investors are patiently awaiting promoters to sell a stake in DLF Cyber City Developers Limited. The stock gained about 33 per cent since the month of April on this news. Albeit this sale has the potential to yield a cash inflow which can cut debt drastically, it is only a steady rise in sales of its residential properties that can generate steady cash flows to take the firm into a novel growth phase. Please visit DLF share price history to know more about the financials and fundamentals of the scrip

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