 "DLF: A fully renovated entity")
Only a cowboy would present a case for DLF. But curiously, there is one. After eternity, what was once the second-highest valued realty company in the world appears to have found its marbles.
The DLF of the past marketed super luxury, premium and mid-end apartments; the DLF of today focuses only on the super luxury and premium apartments.
The DLF of the past thumped its chest end for being a high-volume player; the DLF of today is reorienting its business around moderate (but highly profitable) volumes.
The DLF of the past was woven around reasonable cash flows; it now swears by liquidity.
The DLF of the past possessed an internal project management team; the DLF of today is outsourcing project management to respected international companies instead.
The DLF of the past promised three-year delivery schedules and often struggled to deliver (hostaged by municipal clearances outside its control); the DLF of today is not in the least embarrassed about stating five-year delivery upfront whether customers turn their noses up or not.
The DLF of the past marketed apartments as soon it received statutory clearances; the DLF of today builds to plinth level first and markets properties higher than what it would have sold at scratch.
The DLF of the past implemented construction through an in-house team; the DLF of today seeks external construction vendors, demanding tighter schedules instead.
The DLF of the past showcased its biceps (unmonetised asset bank) as proof of its virility that often camouflaged the more serious discussion of its growing debt; the DLF of today is deleveraging its balance sheet (from gross debt of Rs 25,000 crore in 2013 to Rs 21,500 crore in 2016) and altering debt constituent (from expensive debt largely backing residential projects to lower-priced debt backing annuity revenue-generating commercial properties) instead.
The DLF of the past obsessed with capturing the entire value chain (concept to branding to marketing to construction to commissioning); the DLF of today focuses on its core competence (concept to branding to marketing to finance).
The net result: richer product mix, lower debt, interest rate savings, longer tenure debt, staggered repayment options and enhanced liquidity. And, this is still not the full story. DLF has embarked on a balance sheet restructuring, whereby the company intends to divest 40 per cent in its 100 per cent subsidiary that develops commercial properties (98 per cent occupancy today). Informed experts indicate this divestment can generate in excess of Rs 12,000 crore, making it possible to do two things: draw down consolidated debt on the one hand and provide precious growth resources from within on the other.
Now, coming to the more salivating part. Compare the fact that 40 per cent of DLF's subsidiary is likely to be valued at around Rs 12,000 crore and the entire DLF is valued by the market today at Rs 18,000 crore. This means that 60 per cent of its rich annuity business (likely to generate Rs 2,400 crore rentals, FY16) is being valued at zero, the residential business is being treated as free and the brand is valued at nothing… at a time when the DLF story is turning solid, stable and sustainable.
Ah, opportunity.
The DLF of the past marketed super luxury, premium and mid-end apartments; the DLF of today focuses only on the super luxury and premium apartments.
The DLF of the past thumped its chest end for being a high-volume player; the DLF of today is reorienting its business around moderate (but highly profitable) volumes.
The DLF of the past was woven around reasonable cash flows; it now swears by liquidity.
The DLF of the past possessed an internal project management team; the DLF of today is outsourcing project management to respected international companies instead.
The DLF of the past promised three-year delivery schedules and often struggled to deliver (hostaged by municipal clearances outside its control); the DLF of today is not in the least embarrassed about stating five-year delivery upfront whether customers turn their noses up or not.
The DLF of the past marketed apartments as soon it received statutory clearances; the DLF of today builds to plinth level first and markets properties higher than what it would have sold at scratch.
The DLF of the past implemented construction through an in-house team; the DLF of today seeks external construction vendors, demanding tighter schedules instead.
The DLF of the past showcased its biceps (unmonetised asset bank) as proof of its virility that often camouflaged the more serious discussion of its growing debt; the DLF of today is deleveraging its balance sheet (from gross debt of Rs 25,000 crore in 2013 to Rs 21,500 crore in 2016) and altering debt constituent (from expensive debt largely backing residential projects to lower-priced debt backing annuity revenue-generating commercial properties) instead.
The DLF of the past obsessed with capturing the entire value chain (concept to branding to marketing to construction to commissioning); the DLF of today focuses on its core competence (concept to branding to marketing to finance).
The net result: richer product mix, lower debt, interest rate savings, longer tenure debt, staggered repayment options and enhanced liquidity. And, this is still not the full story. DLF has embarked on a balance sheet restructuring, whereby the company intends to divest 40 per cent in its 100 per cent subsidiary that develops commercial properties (98 per cent occupancy today). Informed experts indicate this divestment can generate in excess of Rs 12,000 crore, making it possible to do two things: draw down consolidated debt on the one hand and provide precious growth resources from within on the other.
Now, coming to the more salivating part. Compare the fact that 40 per cent of DLF's subsidiary is likely to be valued at around Rs 12,000 crore and the entire DLF is valued by the market today at Rs 18,000 crore. This means that 60 per cent of its rich annuity business (likely to generate Rs 2,400 crore rentals, FY16) is being valued at zero, the residential business is being treated as free and the brand is valued at nothing… at a time when the DLF story is turning solid, stable and sustainable.
Ah, opportunity.
The author is a stock market writer, tracking corporate earnings and investor psychology to gauge where markets are not headed