Bloomberg News

DLF Drops After Profit Misses Analyst Estimates: Mumbai Mover

February 13, 2012

Feb. 13 (Bloomberg) -- DLF Ltd., India’s biggest developer, dropped the most in three months in Mumbai trading after reporting third-quarter profit that missed analyst estimates on lower sales and a jump in financing costs.

DLF declined as much as 5.4 percent to 218.50 rupees, the most since Nov. 15, and traded 2.7 percent lower at 224.70 as of 11:02 a.m. local time.

Net income slid 45 percent to 2.58 billion rupees ($52 million) in the three months ended Dec. 31 from 4.66 billion rupees a year earlier, the company said in a statement on Feb. 10. That compared with the 3.92 billion rupee median of 25 analysts’ estimates compiled by Bloomberg. Sales fell 18 percent to 20.34 billion rupees, the New Delhi-based DLF said.

“We expect fourth-quarter reported earnings to be weak driven by lower sales and one-time cost adjustments (resulting in lower margins),” Sandeep Mathew, an analyst at Credit Suisse Group AG who maintained his “underperform” rating on the stock, said in a note today. “We believe lack of new launches remains a drag on reported earnings.”

DLF’s credit rating was downgraded in December by Crisil Ltd., the Indian unit of Standard & Poor’s, after its liabilities excluding cash climbed to a record high of 242.7 billion rupees in the three months ended Sept. 30, data compiled by Bloomberg show.

“We have suffered on the operating side because of the difficult macro conditions specifically the high interest rate regime,” Saurabh Chawla, DLF’s executive director of finance, said on a conference call with analysts on Feb. 11. “These conditions are not going to abate anytime soon, so we have given a cautious outlook over the next couple of quarters.”

Asset Sale

The company is committed to its target of raising 60 billion rupees to 70 billion rupees from non-strategic asset divestment in the next three years to reduce debt, DLF said in response to the downgrade by Crisil. DLF and its joint venture partner Hubtown Ltd. completed the sale of a property in December in the western Indian city of Pune to a unit of Blackstone Group LP for 8.1 billion rupees.

Mathew at Credit Suisse said he’s “skeptical” about the divestment plans because of “issues” linked to assets for sale.

DLF spent 6.19 billion rupees on financing charges last quarter, 45 percent higher than in the same period in the previous year, according to a statement on Feb. 10.

“Operationally the company remains negative free cash flow; this is likely to be the main overhang on the stock,” Saurabh Kumar, an analyst at JPMorgan Chase & Co., said in a report yesterday. “Until visibility firms up on large ticket asset sales, stock re-rating may be under check.”

DLF also said the Income Tax department has levied a demand for additional tax of 11.37 billion rupees, mostly as a disallowance of special economic zone profit. The company hasn’t made any provision for the payment as it is “confident that additional tax so demanded will not be sustained on completion of the appellate proceedings,” DLF said.

Top India news: TOP IN <GO> Top real estate stories: TOP REL <GO> India real-estate stories: NSE INDIA PROPERTY REAL ESTATE <GO>

--With reporting by Weiyi Lim in Singapore. Editors: Tomoko Yamazaki, Linus Chua

To contact the reporters on this story: Pooja Thakur in Singapore at; To contact the editor responsible for this story: Andreea Papuc at

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