DLF Ltd, the country's largest real estate developer, plans to raise Rs 5,500 crore (Rs 55 billion) through the sale of non-core assets such as power units and hotels to help it reduce its debt.
In addition, it is banking on Rs 2,000 crore (Rs 20 billion) of additional inflows from group company DLF Assets, the company said in a presentation to analysts.
The move follows 33 per cent growth in DLF's gross debt to Rs 16,358 crore (Rs 163.58 billion) at the end of March, 2009 from Rs 12,277.08 crore (Rs 122.77 billion) a year ago.
In addition, during the last financial year, the company's revenues fell 28 per cent to Rs 10,541 crore (Rs 105.41 billion) as home buyers deferred purchases and the company offered discounts to lure buyers into many projects. As a result, the company's revenues were hit to the tune of Rs 688 crore (Rs 6.88 billion), it said.
DLF's net profit fell 41 per cent during 2008-09 to Rs 4,629 crore (Rs 46.29 billion), while there was a 93 per cent decline in fourth quarter profits to Rs 159 crore (Rs 1.59 billion). Loss from non-core businesses such as insurance, hotels and power was estimated at Rs 163 crore (Rs 1.63 billion) during the year.
The plan to sell parts of the non-core business was aimed at lowering the company's net debt burden by 53.73 per cent to Rs 6,458 crore (Rs 64.58 billion) by March 2010, as against Rs 13,958 (Rs 139.58 billion) at the end of March this year, DLF said in the presentation.
The net debt is arrived at after excluding the cash-in-hand, estimated at Rs 1,198 crore (Rs 11.98 billion) at the end of March 2009, and equity shown as debt and joint venture company debt, which together amounted to Rs 1,202 crore (Rs 12.02 billion).
Out of Rs 5,500 crore (Rs 55 billion), the sale of its wind power business and three land parcels are expected to generate around Rs 2,100 crore (Rs 21 billion), and the remaining amount is expected to come from the sale of other assets such as hotels, DLF Vice-chairman Rajiv Singh said in an analyst call.
"We are looking to sell those assets which do not significantly add to our bottom line and alter our business plans in the next three years. There is a clear visibility of Rs 3,500 crore (Rs 35 billion as income) to us through this and (the remaining) Rs 2,000 crore (Rs 20 billion) is in various stages of negotiation and identification," Singh added.
The company said that it had met all debt repayment commitments and has made long-term arrangements for the remaining loans. It pointed out that new loans to the tune of Rs 2,500 crore (Rs 25 billion) had been sanctioned and were under disbursal. Of the Rs 3,591 crore (Rs 35.91 billion) debt due for payment during the current financial year, DLF paid Rs 723 crore (Rs 7.23 billion) in April.
Mounting debt and tight liquidity conditions have made real estate companies such as Unitech sell assets to generate funds. Unitech has sold a majority stake in its telecom venture Unitech Wireless to Norway's Telenor and also sold off its Gurgaon hotel. It is in the process of selling its property in Saket in Delhi.
Apart from selling non-core businesses, DLF is also pulling out of unviable real estate projects such as those in Bidadi in Karnataka and Dankuni in West Bengal.
Singh told analysts that the company was focusing on launching mid-income housing projects to beat the slowdown in the property sector. DLF is planning to launch 8-9 million square feet of city-centre projects in Chennai, Kochi, Delhi and Gurgaon and around 5 to 8 million square feet of mid-income housing projects in the National Capital Region (Delhi's suburbs) and southern Indian cities, he added.
DLF is also looking at launching office and mall projects in Mumbai, Chennai, Gurgaon in the current financial year to generate more revenue. The company is looking at capital expenditure of Rs 500 crore (Rs 5 billion) this financial year and Rs 1,000 crore (Rs 10 billion) in the next year, Singh said.
"We hope to restart our commercial projects aggressively this year and restore the company back to non-DAL levels. We want to make up for the stress and loss with limited number of projects," Singh said.