DLF looks for distress sale

DLF Vice-chairman Rajiv Singh says the company would try and fill the gap in its portfolio by acquiring suitable assets which come up for distress sale in a depressed real estate market.

“We will be prepared to look at opportunities, but won’t pick up something just because it’s cheap. However, there are some gaps in our portfolio, which we would like to fill. If there are some significant assets, which are hard to replace in a market like NCR or Mumbai, we will certainly look at it,” said Mr Singh.

He said a challenging external environment had forced his company not to move “at a pace we would have liked to” and asked the government to bring down interest rate for home buyer as well as developers.

“We pay 3% more interest on loan compared to any firm similar to us in another industry,” Mr Singh said. DLF recently borrowed at 16% interest rate. The company reported a 4% decline in net profit at Rs 1,935 crore for the September quarter, compared to the corresponding quarter last year. In comparison to the first quarter of the current fiscal, DLF’s revenue remained flat at Rs 3,840 crore, even as customer advances fell 8.6% to Rs 1,585 crore.

As global economic turmoil unfolds, several MNCs have been taking a relook at their space requirements. Mr Singh says no client so far has backed out, but most of them have been “reluctant to commit space in the past 2 months.” Office space contributes major chunk of DLF’s revenue.

Sales to promoter group company DLF Assets (DAL) contributed 37% to DLF’s sales and 47% to the company’s profits in September quarter. The receivables from DAL though have been piling up, raising analysts’s apprehension on its ability to pay back. DAL currently owes Rs 4,800 crore to DLF. Mr Singh agrees raising equity would be difficult in current situation, but says DAL will be able to raise enough debt on the strength of its rentals and pay back entire amount due to DLF by the end of this fiscal. Properties held by DAL are expected to generate a rental of over Rs 600 crore by March ‘09.

On company’s retail foray, Mr Singh said, “Our intention is to bring high-quality retailer to our malls and that’s why we keep engaging with them. But we have no intention to compete with our other tenants.”