FY14 sales target at 8-10 msf; double EBITDA in 3 yrs: DLF

Shares of the realty-major DLF fell nearly three percent on Friday after it reported a net loss of Rs 4.19 crore in its fourth quarter of the 2012-2013 fiscal due to poor sales losses of subsidiaries.

Speaking to CNBC-TV18, Saurabh Chawla, executive director of DLF said that numbers were not a reflection of the business but of the accounting policy changes the company had to make to keep up with the 25 percent holding norms of Securities and Exchange Board of India (SEBI).
Chawla said: "The earnings before interest, taxes, depriciation, and amoritsation (EBITDA) margins would have been up by about Rs 400 crore and our revenue number would have been up by about Rs 750 crore." He also said that the revenue recognition is likely to be delayed by 12-18 months
In terms of sales, he said the absorption levels in Gurgaon area were strong and DLF is targeting sales of about 8-10 million square feet (msf) in FY14. He said that the company expected the launches of 8-10 msf every year over the next three years, which would double their EBITDA from their current levels in the next three years. Also read: RBI puts foot down on put-and-call options in realty sector Below is the edited transcript of his interview on CNBC-TV18. Q: You have done quite a bit of work over the last few months on fixing your balance sheet problems, retiring some part of the debt. But it seems like business momentum is still eluding you. If Q4 numbers are anything to go by, revenues are quite sluggish. By when do you expect to see any momentum in the revenue line?
A: The business is quite okay. It is the accounting policy change which actually is impacting the number that we are bringing to fore.
Whether the sales that we did in New Gurgaon or some other part of the country and very recently the sales on the luxury segment again in Gurgaon, we saw very good absorption levels in the market place and pretty good price traction.
It is only the change of the accounting norms where we have to now recognise revenues and margins after 25 percent threshold is achieved on the construction spend. That is only impacting the numbers so it is not the business reflection but an accounting reflection in the numbers as such. Had that not happened then the numbers would have been at least on an annual basis.
The earnings before interest, taxes, depriciation, and amoritsation (EBITDA) margins would have been up by about Rs 400 crore and our revenue number would have been up by about Rs 750 crore.
On a quarterly basis, our numbers on the revenue would have been up by about Rs 325 crore and our EBITDA margins would have been up by about Rs 200 crore. So the business is quite good.
The only business that continues to have some slackness is the leasing side of the business and that too in the office space only. In the retail space, we saw very good business prospects during the year gone by.
As we invest forward in some of the new retail malls we expect pretty good traction in this segment of the business. Q: What launches do you have penciled in? What will it amount to in terms of million square feet (msf) that you hope to sell? What kind of average realisations are you hitting especially in National Capital Region (NCR)?
A: We guide the markets usually on the amount sold, the million sq ft that we sell. So we would be doing anything between 8-10 million sq ft across the country.
The business has now reached an inflection point where old projects having being completed or getting completed, their contribution to our top line and bottom-line is receding. The new launches they are going to take affect with a little bit of lag. So during the year we will do about 8-10 million sq ft.
However, I want to highlight that cash will precede earnings. So the capture of earnings will get lagged by about 12-18 months given the accounting policy changes. But cash is something which we will accrue and that is what the focus of the market should be.
_PAGEBREAK_ Q: Which are the areas which could swing it towards the top or the lower end of the guided growth band that you are talking about?
A: It is not a wide range. Yes, mathematically you can put it that way but a launch that happens on March 31 gets reported in the same fiscal year and the one that gets launched on April 5 does not.
So in a long cycle business of ours, you should not look at a quarter-to-quarter numbers as such. What we are guiding the markets is that over the next three years we would be doing every year about 8-10 million sq ft of launches. Many of these are in the space of luxury which are very high margin and high impact on our cash flows and bottom-line.
A lot of them are premium launches both in New Gurgaon and rest of the country. And we expect that on a steady state basis in three years time we should reach an EBITDA number which should be double of what the EBITDA numbers currently are. So that is what our focus is.
On one side with very conservative launch plan but very high impact launch plan and on other side by reduction of net debt we intent to really change the whole dynamics of our balance sheet. Q: Could you update us specifically on Camilla and Crest whether the litigations issues have been resolved over there and for those two properties what kind of realisations you expect to get?
A: Crest is an ex-party decision. Once all the facts are there in front of judicial magistrates, they will take a considered opinion. So at this stage I cannot comment on the litigation aspect of it. It is very early stage right now and let us see how that goes going forward.