mumbai 08 06, 2012, 22:40 IST
DLF , India's biggest real estate developer, reported little success in paring its debts and posted an 18 percent drop in first-quarter net profit on Monday, hit by high interest and slowing home sales in Asia's third-largest economy.
Like other developers, DLF gorged on cheap finance during the 2007-08 property boom to fund ambitious expansion plans for millions of square feet of homes, offices and malls.
Now it is struggling to reduce its borrowings of 227 billion rupees as of the end of March and improve profitability as buyers, burdened by high inflation and interest rates, hold off on purchases.
The Delhi-based developer managed to sell 17.7 billion rupees worth of non-core assets against a target of 50-60 billion by March and offloaded just 3.7 billion worth in the first quarter after setting a new target of 100 billion rupees of divestments in the medium term.
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Assets it failed to sell included the global hotel chain Amanresorts, which stalled in January after DLF received lower-than-expected bids, a plot of land in Mumbai which private developer Lodha is close to buying, and its wind turbine business.
Finance costs up 26 percent at 6.2 billion rupees ate into consolidated net profit of 2.93 billion rupees for the quarter ended June, compared with 3.58 billion a year ago.
Revenue was down 10 percent at 22 billion rupees.
Analysts on average expected the company to post net profit of 2.86 billion rupees on revenue of 24.7 billion, according to Thomson Reuters I/B/E/S.
In 2011, home sales in the New Delhi region, DLF's biggest market, were down 20 percent by volume, according to consultant Jones Lang LaSalle India's Real Estate Intelligence Services.
Shares in DLF, valued at $6.3 billion by the market, closed 1.83 percent higher at 211.25 rupees before the results were announced, in a positive Mumbai market.
The shares, up 15.4 percent this year, are lagging a near-21 percent gain in the real estate index.
(Editing by David Cowell)