DLF Q2 profit drops by 28% at Rs 100cr; cuts debt by Rs 861cr

Sale of non-core assets and internal accruals helped the company in bringing down the net debt level to below Rs 20,000 crore level

India's largest realty firm DLF has reported 28% fall in consolidated net profit at Rs 100.05 crore in second quarter of this fiscal on lower sales but reduced net debt by Rs 861 crore to Rs 19,508 crore.

DLF also announced plans to raise Rs 1,000 crore through launch of first Commercial Mortgage Backed Security (CMBS) by end of November as part of strategy to reduce interest cost.

In a conference call to analysts, DLF expressed confidence that it would achieve the sales booking target of Rs 6,000 crore in 2013-14 and further cut debt by Rs 2,000 crore to Rs 17,500 crore by March end.

DLF said that it plans to raise Rs 3,500 crore via sale of non-core assets including luxury hospitality chain Amanresorts, where it is negotiating with the multiple bidders and expects to close the transaction soon.

Late yesterday, DLF announced its results posting Rs 100.05 crore net profit  in the quarter ended September 30, compared with Rs 138.51 crore in the year-ago period.

Income from operations, too, declined by four% at Rs 1,956.09 crore during July-September quarter of 2013-14 fiscal against Rs 2,039.54 crore in the year-ago period.

"EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortisation) and profits continue to be muted on account of old projects nearing completion and new projects still not hitting revenue recognition threshold," DLF said.

"In the current economic and high interest rate environment, the company expects a slow absorption of product in the market," it added.

DLF Group CFO Ashok Tyagi told analysts that the "in the next 2-3 quarters, EBIDTA will stay muted".

Higher expenses on tax and interest dragged the company's net profit down. While finance cost rose to Rs 609.08 crore in the second quarter of 2013-14 from Rs 522.42 crore in year-ago period, tax outgo also rose to Rs 85.47 crore from Rs 39.38 crore during the period under review.

On sales bookings, Tyagi said DLF achieved a total sales booking of Rs 3,160 crore in first half of this fiscal against Rs 1,326 crore in the year-ago period.

"Achieving Rs 6,000 crore sales does not look challenging," he said, adding that the company would launch two new projects in Gurgaon and is also expecting Rs 500 crore worth sales from other parts of India.

The company would put two retail malls under the CMBS and plans to raise Rs 1,000 crore, Tyagi said.

On Amanresorts sales, DLF Executive Director Finance Saurabh Chawla said: "We are in a dialogue with multiple bidders who have money in banks".

In December 2012, DLF announced the deal with Indonesian hotelier Adrian Zecha to sell Amanresorts for USD 300 million. Zecha missed the June deadline to conlude this deal. In July, DLF walked out of exclusivity pact with Zecha and opened talks with 4 other potential buyers.

On CMBS, Chawla said this would be the 'game changer' for DLF as the instrument would improve the quality of debt. DLF has an annuity income of Rs 2,000 crore from rental assets.