DLF, the country’s largest property developer, could face headwinds in the subsequent quarters with the launch of half a dozen projects in the next two months.
DLF said today it will start work for projects with over eight million square feet in Gurgaon, Kochi and Delhi in the current quarter of the financial year. The company needs to complete 5.5 million square feet in pre-sales this quarter, to meet its targeted pre-sales of 12 million sq ft in 2010-11.
“Some of the launches did not materialise in Q4 because of delay in approvals. In the next 3-4 weeks, we expect to get all approvals and launch our projects,” said Ashok Tyagi, group financial officer, during a conference call with analysts today.
The company’s upcoming luxury project in Mumbai is also expected to take a while because of a delay in regulatory approvals and preparation of engineering and architectural plans.
Terming the pre-sales guidance of 12 million sq ft a tough target, a Deutsche Bank analysis said: “Even after the proposed aggressive launch of eight million square feet in Q4, it would be difficult to meet the projected 12 msf pre-sales in this fiscal.”
Analysts also said the additional tax demand of Rs 1,180 crore by the income tax department could also impact the finances of the company.
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Last year, the income tax department had ordered a special audit of DLF accounts on the company’s alleged role in trying to lower its tax liability by understating sales for 2005-06. The department had raised an additional tax demand after the audit.
DLF posted a net profit of Rs 1,295 crore for the nine months ended December 31, 2009 and of Rs 1,817.1 crore in 2009-10. Analysts expected DLF to post a net profit of around Rs 2,400 crore in 2010-11.
“We have filed appeals in 22 companies (subsidiaries). It will take 12-18 months for the clarifications,” said Ashok Tyagi. The company has sought help of the best tax lawyers in the country.
Meanwhile, DLF’s net debt has gone up by four per cent in the third quarter of 2010-11 at Rs 20,694 crore, against Rs 19,913 crore in Q2 of the current financial year. The company attributed this to investments in land, delay in execution due to the monsoon and in government approvals.
The company which needed to pay Rs 2,890 crore in debt repayments in the current financial year, repaid Rs 2,680 crore so far. DLF needs to repay Rs 2,700 crore in 2011-12.
DLF’s cost of debt has gone up to 10.8 per cent in the December quarter against 10.5 per cent in the September quarter due to rising interest rates, the company said. The company is expecting a net debt-equity ratio of 0.6 in 2011-12 against the current ration of 0.79, said Tyagi.
“We are trying to bring debt levels at comfortable levels,” he said. The company is planning to achieve this through sale of properties and non-core assets.
DLF has sold Rs 403 crore of non-core assets, including land parcels during the Q3 of 2010-11. The company has sold non core assets of Rs 2,900 crore, against the target of Rs 4,500 crore.
“Numbers are ahead of our expectations but there is increase in debt, which is a concern given the current environment. They need to repay around Rs 2,700 cr in 2011-12. If their asset sales meets its target, they will be able to repay the debt as per schedule,” said Aashiesh Agarwaal, an analyst with Edelweiss Securities.