DLF will have to focus on core business for further debt reduction

 Manu Kaushik        Last Updated: January 22, 2013  | 16:24 IST

Manu Kaushik
Manu Kaushik
DLF, the country's largest real estate developer, is likely to end the current financial year with its total debt at Rs 18,500 crore, within touching distance of its target for the year end.

Industry watchers are impressed.

The company is said to be close to finalising a deal for its last non-core business, wind energy. The wind energy deal, which includes the sale of windmills in Gujarat, Tamil Nadu, Karnataka and Rajasthan with a total installed capacity of 260 MW, is expected to generate Rs 900 crore.

With the wind energy deal, DLF's net debt is expected to come down to around Rs 18,600 crore, more or less in line with the target of Rs 18,500 crore for 2012/13.

Last month, the company announced that it was selling luxury hotel chain Amanresorts to its founder Adrian Zecha for around $300 million (Rs 1,643 crore).

In the next financial year, DLF will also look at diluting its promoter equity. The equity sale will help it comply with market regulator Securities and Exchange Board of India's new guidelines, which restrict promoters from holding a stake of more than 75 per cent. Currently, DLF's promoter holding is at 78.6 per cent.

Analysts at Religare Capital Markets hope that these deals will together result in DLF's net debt coming down to Rs 15,000 crore. That is a reduction of around Rs 10,000 crore since March 2012.

However, with all the non-core businesses gone, the focus will now shift to real estate, its core business. A part of DLF's current interest burden is met through rental income. With lower debt, the interest outgo will also be lower.

In a recent report, Macquarie Equity Research has said that the next big trigger for cash flow improvement for DLF would be "residential launches in the fourth quarter of 2012/13 with the company targeting to launch 8-10m square ft".

In the current (fourth) quarter, DLF will launch two high-end projects in Gurgaon. In addition, around 30 per cent of the ongoing projects are scheduled to be completed in the next two quarters.

DLF's shares were trading at Rs 250 on the Bombay Stock Exchange at 2.35 pm, down 2.63 per cent.

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