Company arming itself with permission to raise funds soon after announcing a buyback.
India’s biggest listed property firm DLF has decided to ask shareholders for permission to raise up to Rs 10,000 crore through a placement to qualified institutional investors. That’s surprising because the Gurgaon-based firm had recently said it would buy back 2.2 crore shares from the market at a maximum price of Rs 600 for a total amount of Rs 1,100 crore.
The company has to wait for six months after the buyback closes before raising money from the capital market. But the buyback hasn’t even begun and would take at least three months to be completed. In which case, the fund-raising is still some time away and the company is merely using the annual general meeting to arm itself with the necessary approvals. The DLF stock has lost over 60 per cent from its peak of Rs 1,205 to hit the current level of Rs 468. The company had made an initial public offering just over an year ago at a price of Rs 525.
DLF’s June 2008 quarter results were disappointing with the net debt increasing to Rs 13,200 crore from Rs 10,000 crore in the March 2008 quarter, while receivables (net of customer advances) were up at Rs 5,800 crore from Rs 5,000 crore. Operating profit margins fell around 1000 basis points to 61.5 per cent. Sales were up 24 per cent y-o-y at Rs 3,850 crore but were down sequentially.
The net profit, too, was up 23 per cent y-o-y but down sequentially. The company’s revenues from DAL (a company owned by the promoters of DLF) have been coming down over the past few quarters and now account for 40 per cent of the total revenues.
DLF has a presence across all verticals—residential, retail and offices. Rising interest rates and lower demand from the IT and ITeS sectors could mean lower volumes for developers in the next couple of years. Moreover, interest rates on mortgages are up more than 100 basis points in the last three months, which is keeping home buyers away.
The management believes that the environment will remain difficult in the near-term though improve over the medium-term. Analysts believe that property prices could correct further, across residential and commercial segments, with supply coming into the market and demand still weak.
