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DLF stares at cash burn, spike in debt levels in coming months

LiveMint logoLiveMint 13-08-2017 Madhurima Nandy

Bengaluru: India’s largest real estate firm DLF Ltd continued to burn cash on account of construction spend and weak home sales in the April-June quarter and anticipates a temporary spike in net debt levels, it said in an analyst presentation on Saturday night.

DLF’s net debt rose by around Rs802 crore to Rs25,898 crore in the first quarter compared to the preceding quarter. In the last one year, DLF’s net debt has risen by almost Rs3,778 crore.

“Almost zero incremental sales coupled with outflow for construction activities to accelerate project completions continued to burn cash during the quarter. Operating cash deficit of Rs750 crore per quarter to continue for next 2-3 quarters,” the developer said in the presentation.

In compliance with Real Estate (Regulation and Development) Act or RERA, DLF halted all sales from 1 May. Given the complexity of issues related to the transition to the new regime of RERA and the goods and service tax (GST), new sales booking shall get deferred for at least a quarter, DLF said.

Despite the uncertainty and period of transition, the company said it has continued to focus on completion of projects in order to create finished inventory for sale in the future when normalcy returns after 2-3 quarters.

“Operating shortfall shall continue due to subdued sales and collections, while construction expense continues. Continued capex in new office complexes and construction spend on residential spend shall result in temporary spike in net debt levels for which financing is already in place,” DLF said.

On Saturday, DLF posted a 58% drop in net profit to Rs109.01 crore in the April-June quarter while its revenue rose marginally by 9% to Rs2,211.24 crore, compared to the corresponding year-ago quarter. The decline in net profit in the June quarter is mainly owing to the one-time extraordinary gain of Rs329 crore from the sale of DT Cinemas to PVR group in the year-ago quarter.

On the much-awaited stake sale in its rental unit, DLF said that it is in the final stages of discussion on the documentation and shall be put up to the “Audit Committee/Board for final approval”.

In March, DLF had said that its promoters are in exclusive talks with Singapore sovereign fund GIC Pte. to sell 40% stake in DLF Cyber City Developers Ltd (DCCDL). The deal will help it raise an estimated Rs12,000-13,000 crore and significantly reduce its debt.

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