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Business News/ Companies / DLF’s net profit dips 30% as fall in sales counters cost cuts
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DLF’s net profit dips 30% as fall in sales counters cost cuts

Net profit drops to Rs127.77 crore from Rs181.19 crore a year ago; revenue falls 25% to Rs1,725.77 crore

In coming quarters, DLF’s performance will depend on how the NCR picks up in terms of sales, says an analyst. Photo: Ramesh Pathania/MintPremium
In coming quarters, DLF’s performance will depend on how the NCR picks up in terms of sales, says an analyst. Photo: Ramesh Pathania/Mint

Bangalore: DLF Ltd, India’s largest developer by market value, on Thursday posted a 30% drop in net profit for the June quarter as a fall in sales countered cost cuts.

The net profit dropped to 127.77 crore from 181.19 crore in the year-ago period, the company said. Revenue fell 25.44% to 1,725.77 crore during the same period.

“DLF’s revenue and profit are in line with our expectations, but their margins are healthier due to cutting down on employee expense and other expenses," said Adhidev Chattopadhyay, analyst with HDFC Securities Ltd. “In the coming quarters, the company needs to launch projects and generate much-needed cash flows."

DLF’s performance will also depend, to a great extent, on how the national capital region (NCR) and property markets such as Gurgaon, its core location, pick up in terms of sales, Chattopadhyay added.

Sequentially, net profit and revenues fell 41.83% and 12.40% respectively.

DLF said on Thursday that it had “entered into a memorandum of understanding (MoU) dated June 30, 2014 for sale of a project. As per the terms of the MoU, the foreseeable loss of 29.49 crore reflecting the difference between the sales consideration and carrying cost of the project is classified as an exceptional item in these financial results". The company hasn’t disclosed details of the project.

In June this year, DLF also raised 375 crore by selling commercial mortgage-backed securities (CMBS) against its luxury mall DLF Promenade Ltd. Earlier in May, it raised 525 crore against another luxury mall, DLF Emporio Ltd—marking the first CMBS issuance in the country by a developer.

A CMBS is a debt product through which a developer raises capital against a rent-yielding commercial asset for a tenure of seven to 11 years.

Both the NCR centred on Delhi, and Mumbai have seen subdued property sales, as prices remained high for several quarters.

While Mumbai has started showing signs of a recovery as enquiries pick up, NCR will possibly see signs of a revival only in the second half of 2014, analysts said.

On Thursday, Mumbai-based real estate firm Housing Development and Infrastructure Ltd (HDIL) reported a 148.59% jump in net profit to 60.06 crore for June quarter from a year ago owing to completion of projects. The company follows project completion method of accounting.

Revenue rose 104.81% to 242.50 crore in the same period on better sales and with the Mumbai realty market finally looking up. HDIL has also been divesting non-core businesses and assets to strengthen its balance sheet.

In July, Carnival Films Pvt Ltd said it had recently bought out HDIL’s multiplex chain Broadway Cinemas for around 110 crore.

Sarang Wadhawan, the vice-chairman and managing director of HDIL said, “Company’s financial performance indicates our efforts on improving all financial parameters in a structured manner. Our focus continues to be debt reduction and execution of ongoing projects." “HDIL also intends to expand its project activity and achieve greater levels of year-on-year growth in the remaining quarters of this fiscal," he added.

HDIL has a net debt of 2902.67 crore and its debt-equity ratio is 0.33.

DLF shares ended at 198.40 on BSE, down 0.87% from previous close, while the benchmark Sensex fell 0.74% to 25,894.97 points. HDIL shares ended at 92.75, up 1.64%.

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Published: 01 Aug 2014, 12:07 AM IST
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