DLF: turning optimistic

DLF: turning optimistic
Financial Express, February 2, 2010, Page 6

Akash Joshi

The country’s leading real estate company DLF is seeing some improvement in the sentiment from the Street. Several analysts have upgraded their recommendations from the negative zone earlier. One of the reasons is the slow but steady uptick in real estate sales. DLF managed to recorded revenues worth Rs 2,030 crore in the December 2009 quarter, 16% higher that the September 2009, and 48% over the same quarter of the previous year. However, analysts are still not gung-ho as the operating margin was way below expectation at 41%, a sharp drop compared to the 56.5% in the December 2008 quarter and 52.2% on a sequential basis. The main reasons, cite analysts, is higher than expected revenue booking from lower margin areas, especially in the Chennai and New Gurgaon projects.

An increase of around 20% in employee costs (and other miscellaneous) also caused the margins to slump. In the December 2009 quarter, DLF sold around 3.1 million sq ft of projects with a mix of luxury, high-end and premium homes. And if the luxury market picks up further, the margins could stablise at earlier levels. Another trigger would be a pick up in office sales, which remains flat. In the first nine months of financial year 2009-10 DLF sold approximately 8.5 million sq ft of residential real estate and it is expected that the company would manage around 13.5 million sq ft and analysts would be watching out increased revenues in the last quarter.

DLF in December 2009 had announced the integration of its 100% interest in its main rental subsidiary DLF Cybercity with the holding company for DAL in a 60:40 share swap ratio. The successful listing of DAL on Singapore will boost the sentiment further. However, with interest rates coming under pressure any rate hikes would be the dampener.