DLF reduces its net debt by 16% in the June 2022 quarter

The North based realtor, DLF Ltd, and one of India’s largest listed realty players had reported healthy numbers for the June quarter. But more important was the fact that DLF had reduced its net debt by 16% in the June 2022 quarter. Over a one year period, the net debt of DLF had come down from Rs2,680 crore to Rs2,259 crore. Net debt is the debt that is after adjusting the gross debt for any cash and near money securities that are available in the balance sheet of the company that can liquidated at short notice.

While announcing the quarterly results, the DLF top management also affirmed that they would look to further reduce the debt of the company in the medium term. The company had also affirmed as part of its presentation that the completed inventory and receivables from customers against sold units was in itself sufficient to discharge current liabilities of the company so the short term liquidity position of the company was in an extremely safe position. This obviates any concerns that investors may have about the liquidity situation.

The gross debt of DLF, as explained above, also fell sharply from Rs4,755 crore to Rs3,900 crore on a yoy basis in the June 2022 quarter. The operational performance in the quarter was quite impressive with sales bookings doubling sharply to Rs2,040 crore during the June 2022 quarter. For the full year, the company anticipates that the total sales bookings would be up by 10% at Rs8,000 crore. It had bookings of Rs7,273 crore in the previous fiscal year FY21. However, the growth over FY20 was not comparable due to the impact of COVID.

One of the trends that the company highlighted in its presentation to the investors was that the demand for housing was gradually getting consolidated towards large branded real estate developers with a good track record of executing projects. That reduces the risk for buyers, especially if you see the kind of soup that people have found themselves in projects like Amrapali group. Due to such unsavoury incidents, the sales bookings of DLF have grown sharply in the June quarter and it expects this momentum to continue in coming quarters.

However, all is not hunky dory for the real estate major. There are some headwinds at this point of time like interest rates hike and a possibility of recession. It is entirely possible that if the slowdown gets real, then people may postpone their home purchase decisions. However, the company is not making any material adjustments to its sales guidance for now. It may be recollected that DLF had reported 39% growth in its net profits for the June 2022 quarter at Rs470 crore, while total income was up 22% yoy at Rs1,516 crore in Q1FY23. 

In the real estate space, DLF has a pedigree to back its claims. Till date, DLF has developed more than 153 real estate projects spread across more than 330 million SFT area. In addition, DLF also has 215 million SFT of development potential across the residential and commercial segments. In addition, the group also holds a high rent-yielding commercial portfolio of over 40 million SFT spread across India. However, bulk of its commercial assets are housed under DLF Cyber City Developers, a joint venture with the Government Investment Corporation (GIC) of Singapore, a leading sovereign wealth fund.