DLF posts record decline

DLF Ltd, India's biggest developer, a record 93% decline in fourth-quarter profit as demands for home, offices, shops fell following an economic slowdown.

The company said in a release that net income fell to 1.59 billion rupees in the quarter ended on Mar 31, 2009 from 21.80 billion rupees a year ago.

Falling demand in homes, offices, shops are curtailing DLF's ability to start new projects. DLF was the worst performer on BSE Sensex.

The company has lowered home prices for projects in Chennai and Gurgaon to boost flagging demand. DLF gained 38 percent in April as it cut home prices and investors grew optimistic that lower borrowing costs may spur new purchases.

The company plans to exit some businesses, including wind power, to reduce debt and has withdrawn from township projects in Bidadi and Dankuni.

Full-year profit fell 41 percent to 46.3 billion rupees and sales fell 28 percent to 105.4 billion rupees, the company said. The figures include 1.63 billion rupees of losses from non-real estate businesses such as DLF Pramerica Life Insurance Co., hotels and power, DLF said.

RBI and Real Estate Firms

The Reserve Bank of India (RBI) is examining the books of ten real estate companies to verify their solvency and assess the systemic risks arising from possible defaults by these companies on various loans and public deposits. The exercise followed concerns expressed by bankers over possible large-scale defaults in loans and deposits, which may have implications for the entire system.

The companies identified for assessment are Akruti Citi, Anantraj Industries, Ansal Properties, DLF, HDIL, Indiabulls Real Estate, Mahindra Lifespace, Peninsula Land, Phoenix Mills and Unitech.

RBI has also sourced data on loans, cash deposits and other fixed deposits held by these companies from all banks and mutual funds. Most of these companies have also borrowed through non banking financial companies (NBFCs) that they have floated, and the central bank is verifying the books of these related NBFCs independently.

The data will help determining the correct debt-equity ratio, solvency, state of liquidity to avert defaults, cash flows and profit margin in the current operations.

After the review, the companies or their NBFC arms may be advised to check exposure in line with cash flows, and banks may also be asked to cut exposure.

Sources said these real estate companies had raised long-term loans from banks and had placed commercial paper amounting to thousand of crores to raise short-term financing from the mutual funds.

The mutual funds, in turn, got a major part of the subscription to their schemes from the banks that held public deposits. This means a default on even a single commercial paper will impact the mutual funds, the banks and ultimately public deposits.

Large-scale borrowing has distorted the normal debt equity ratio for most of the companies and made them highly leveraged. RBI is of the view that the debt is being camouflaged in cases where the ratio meets standard norms.

DLF

DLF Limited :

Address :

Shopping Mall, 3rd Floor, Arjun Marg, DLF City, Phase - I,
Gurgaon - 122002
Haryana

Tel : 0124 - 4334200
Fax : 0124 - 2355581

BSE : 532868

NSE : DLF

Bloomberg : NA

Reuters : DLF.BO

Index : BSE Sensex, BSE Realty

Sector : Real Estate

Market Lot : 1, Face Value : 2

Website : www.dlf.in

DLF is the largest real estate company in India. The group has over 224 million sq. ft. of existing development and 751 million sq. ft. of planned projects. DLF is committed to quality, trust and customer sensitivity, and deliver on promises with agility, financial prudence and in tune with the highest global standards. The company has also entered into several strategic alliances with global industry leaders.

The core business traditionally has been into three prime divisions: Homes, Offices and Shopping Malls. To these DLF has added three more divisions: Hotels, Infrastructure and SEZs.

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