Relieved DLF aims to clock Rs 3500cr sales bookings in FY15

Sonia: If you could tell us how you will be financing this entire payment that you have to make of Rs 630 crore? I understand that it will be in instalments now but will you finance it through profitability, through your cash reserves, what will be the debt situation now and how much pressure would you see?

A: Even in our analyst presentation and that stand continues that obviously while post the order that we got from Securities and Exchange Board of India (SEBI), which did to some degree impact our ability to raise money through non-convertible debentures etc but we are working with the banks to ensure that we stay liquid and we should hopefully do so. However, it will be very obvious to say that this is a welcome relief to the degree that the honourable Supreme Court (SC) had given it and we will obviously pay it as and when the court demands it.

Latha: Overall what is the working capital and debt position? Are things getting a little better even if you cannot access the equity markets, on the debt side are things getting a little better because banks are saddled with a lot of cash and very few borrowers, effectively is borrowing rates coming down?

A: The way I would say it is the borrowing rates on the rental assets, which is the lease/rental discounting and mortgage bound and those sort of products are clearly southwards. The borrowing rates on the development side of the business are still firm at somewhere between 12.5 percent and 13 percent levels but on the rental side, clearly they are on the downward trend for sure.

Latha: This particular relief that you don’t have to pay Rs 480 crore right away will improve things a bit or is it just that a potential problem has gotten resolved that’s all?

A: I think it is the latter because the fact is that I still need to provide for Rs 480 crore, it is just that across -- instead of it being on a single day, it needs to be provided across maybe a period of 6-7 months but clear liquid provision has to be carried in the books and in the treasury to ensure that whatever is the final SC decision, is honoured.

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Latha: Can you size up the urban development ministry’s approval for higher floor area ratio (FAR) for Delhi, both for you and for the industry? For you does it, give you the capacity to build anything more at all, what is the land you own and how much more can you build but more importantly, for the industry is elbow room to build more not negative for realisations?

A: I think if one can sort of be slightly more than myopic beyond the immediate quarter or two or the pricing P/Es, anything which strengthens the supply pipeline in the major metros is a welcome step.

Clearly the notification is split into two halves, one is the below 1,000 sq yards and the other is above 1,000 sq yards. Obviously in the relaxations in the 750-1,000 sq yards bucket -- I don’t think we are an active player in that but it would clearly give a boosted supply to a lot of those independent floor products that exist in Delhi. I think the implications on the larger plots and how do they impact the group housing societies that we are developing is something that we need to study but overall anything which strengthens FAR makes it more realistic and improved supply is a good development in the medium-term.

Sonia: What does the second half of the year look like in terms of launches because you will need to have a substantial amount of launches, revenue recognition in order to keep your debt under control, can you take us through what the pipeline could look like?

A: Infact the pipeline is that we should hopefully be able to do the launch of one additional product in the luxury segment at the Golf Course Road. Our Camellias, which is the Gold Course Villas continue to sell and there has been some degree of strengthening in the pace of sales in the last quarter as you must have seen in the results.

We do plan to launch at least one new development in what is loosely called the new Gurgaon area, which should hopefully be at the right ticket sizes to facilitate a fast offtake. So that is clearly what one is looking at right now between now and March. If things continue to strengthen then maybe another launch in the new Gurgaon area could also happen.

Sonia: You did see a sales booking of about Rs 900 crore or so in the quarter gone by, can you give us any kind of trajectory for the second half of the year, what could the quarterly run rate look like?

A: Clearly, we have done about Rs 1,200 crore in the first half of the year, Rs 300 crore in Q1 and Rs 900 crore in Q2. Last year if you see, we had done about Rs 3,500 crore of total sales bookings and we continue to be optimistic based on whatever we have lined up for Q3 and Q4 and the sales of Camellias that we should try to hopefully at least hit that number if not meet anything higher than that but Rs 3,500 crore looks doable as we see right now.

Latha: Have you got a handle on how you will handle the maturity of the Compulsorily Convertible Preference Shares (CCPS)?

A: That is an important thing. We still have almost four months before that comes up finally. Our Securities Appellate Tribunal (SAT) hearings begin on December 10. So obviously we will need to keep on making plans of all alternative scenarios given how things shape out but that is something that maybe six-eight weeks from now, I should be able to give you a clearer view on what do we do under what scenario.

Sonia: You were telling us about the impact of the FAR in Delhi. What is the exact developable area that DLF has in Delhi, which could be impacted by the FAR and on the whole how much do you expect real estate prices to get impacted by?

A: The real estate prices in Delhi in the independent floor which is the market which should mostly be impacted by this development, have been under reasonable degree of pressure in the last 12-18 months. So obviously this will not have an immediate relief but as I said over a medium-term, if this bolsters supply, it will obviously have some degree of plateauing impact or tampering effect on any further price increases, maybe some minor southward trends also but it is something which will by and large impact the independent floor market. The group housing market which we operate in is really a different animal.