Ashok Tyagi, chief financial officer of DLF says, we should be able to reduce our debt by an anticipated level of about Rs 5,000 crore in FY13.
We are still committed to keep on reducing our debt.
Five years ago DLF hit the markets with the countries largest initial public offering (IPO) of around Rs 10,000 crore. But those were different times. The bulls ruled the markets, property prices had hit the sky, DLF’s debt was a shade under Rs 10,000 crore, a massive land bank of 574 million square feet spread across 32 cities and a 74-26% joint venture with Hilton to become the countries largest hospitality chain. But then the 2008 financial tsunami changed the world and DLF was left staring at an over stretched balance sheet.
Its debt has now surged to around Rs 25,000 crore, forcing the management to downsize its ambitions. India's largest real-estate company is now getting rid of large non-core business and getting back on the path of fiscal consolidation.
DLF sold an 18 acre prime land parcel in Mumbai’s Lower Parel area to Lodha Developers for Rs 2,700 crore. All of that will be used to shave off the company’s debt sometime in October.
In an interview to CNBC-TV18’s Nayantara Rai, Ashok Tyagi, chief financial officer of DLF speaks about the company’s furture.
Below is the edited transcript of his interview on CNBC-TV18.
Q: The Lower Parel land has been sold to Lodha Developers. So, by October, Rs 2,700 crore of your debt will disappear from the books. The next big item will be the sale of Aman Resorts. When is that going to happen?
A: We are happy that of the three big ticket deals, which we were talking about, the first one, we have signed an agreement with the Lodha. We have also got the first tranche of payment of Rs 500 crore on Monday. We expect the deal to consummate by end of October.
On the balanced transactions, we are clearly in very close and serious discussions with the buyers, but it will be very difficult for me to pinpoint an exact date or a specific time frame. In this financial year, we should be able to close all of these transactions and reduce our debt by an anticipated level of about Rs 5,000 crore.
Q: Aman Resorts sale and the wind sale will happen this financial year, in FY13. Is it going to be in this quarter or the next quarter? Can you give a little indication of that?
A: Honestly, these are pretty complex transactions. You are dealing with a very sophisticated financial investors. So, it is very difficult to time these to a specific quarter. So, whether they happen in this quarter or next or whether tail of some transaction overflows into the quarter beyond as well, I unfortunately can't control and micro manage that process with that degree. But we do believe that in this financial year we should have done all of this and reduce our net debt by Rs 5,000 crore.
Q: How much are you going to raise from the sale of Aman Resorts and the wind power business?
A: Our target for net debt reduction this year is Rs 5,000 crore, predominantly being driven by the strength of the non-core and some other minor non-core and some operational surpluses. I would not be able to apportion exact estimates of how much we expect from each deal. We would be able to disclose, once we sign the agreement and we are in a position to disclose this to stock exchanges and to the media.
Q: Sources suggest that Aman Resorts sale is likely to happen around Rs 1,700 crore. The expectation was that it would be around USD 400 million or may be a little above that. Are you selling it now a lower valuation?
A: We are not selling anything at a lower or higher valuation than what the market can give. Not only now, right from the start of this financial year, we had maintained that we will raise approximately Rs 5,000 crore for a net debt reduction from the sale of these three assets. We overall still stick to that guidance.
DLF stock price
On September 15, 2014, at 15:14 hrs DLF was quoting at Rs 173.95, down Rs 1.95, or 1.11 percent. The 52-week high of the share was Rs 242.80 and the 52-week low was Rs 127.35.
The company's trailing 12-month (TTM) EPS was at Rs 2.52 per share as per the quarter ended June 2014. The stock's price-to-earnings (P/E) ratio was 69.03. The latest book value of the company is Rs 93.40 per share. At current value, the price-to-book value of the company is 1.86.
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