Confident of crossing Rs 3K-cr annual sales in FY15: DLF

Though the company reported poor set of numbers in the third quarter ended December 31, Ashok Tyagi, Group CFO, DLF is confident of crossing at least the lower-end of their annual pre-sales sales target of Rs 3000 crore by FY15-end.He is worried that the demand still continues to be sluggish with only a very marginal pickup seen in NCR region. However, sales in luxury product have started picking up and expects a pre-sales of Rs 1,100 crore in fourth quarter from Crest and Camelia.Answering a query on the rise in debt, he said the basically the increase in debt was due to decrease in sales and the profits got eaten by high interest burden.According to investors' presentation, the net debt of DLF, the country's largest real estate developer, rose to Rs 20,336 crore as of December 31, from Rs 19,943 crore at the end of the July-September quarter. The current attributable net debt to DevCo (development arm) is Rs 6,350 crore and to RentCo (rental business) is Rs about Rs 14,000 crore, it added.In case the RBI does another rate cut then it would definitely help demand because home lending rates would drops.

Below is the transcript of Ashok Tyagi’s interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.Sonia: This time around your presales were down about 30 percent on a quarter-on-quarter (QoQ) basis. Can you give us a sense of whether you expect sales to pick up in the last quarter of the year and by the end of FY15 what could your targeted sales look like?A: If you recall about a couple of quarters back we had given a guidance that our presales for the year should be in a range of Rs 3,000-3,500 crore for the entire year. We have done about Rs 1,900 crore by the end of December. We are right now placed pretty well to be at least on the lower-end of that range. So, we should definitely be looking at crossing Rs 3,000 crore for the annual sales numbers.Latha: Give us the feel of how easy or tough it is to run business? Are working capital flows a little better at least? Are you seeing at least some green shoots of invested demand coming in or buyer demand coming in? What is the sense you are getting from the banks, what they tell us is that probably a base rate cut is likely in April when the slack season starts will that be a big kicker if there is just one dose of EMI fall for the existing customer?A: From a demand stand point and I am talking of the NCR and couple of other big markets that we operate in - demand in all fairness continues to be pretty muted. However, there has been a marginal uptick over the previous quarter but the demand overall continues to be sluggish. We are still waiting for the demand pick up. An interest rate cut would definitely help. As and when it comes it will be the second interest rate cut and hopefully the home lending rates should start dropping down to a numbers closer to 10 percent will be the numbers where fence by buying decisions being getting made.While we continue to see muted demand across the country, our sales in the luxury products in the DLF Golf Course sector have began picking up last quarter and continue to be doing better in the last couple of months now as well which is primarily driven by the fact that we put the next phase of Crest in the market after about almost a couple of years since the previous one and sales of the golf apartments Camellia hasve seen some degree of an improvement. However, from a macro stand point the market continues to be sluggish.Sonia: You just told us that you will meet the lower end of your guidance for presales which is Rs 3,000 crore and in the nine months of this year you have done Rs 1,900 crore so in effect you have to do Rs 1,100 crore of presales in Q4. Where will that come from in terms of project wise sales. A: Most of this Rs 1,100 is coming from the DLF five golf course area primarily the Crest and the Camellia which have been witnessing some degree of improvement in the sales in the last three to four months. Latha: Is there anything specific you are expecting on real estate investment trust (REITs) anytime soon? What is the one thing that is blocking it? Do you see it becoming operational in this calendar year? A: As we have mentioned in our analyst presentation, we are sort of looking forward to trying to get on to a REIT platform in the next fiscal. It will be driven significantly by the tax issue that is plaguing the REITs and how much they will be addressed in the forthcoming Budget and developments there after. Like the entire industry we continue to be hopeful that some of the pain points around the tax issues on the REIT should get addressed in the forthcoming Budget. It will obviously take a few months after that to structure the entire structuring around the REITs. However, we are looking forward to doing REITs one in the commercial office space and one in the retail mall space. Hopefully, we are looking at in the next fiscal but if it overflows by one or two quarters one cannot say right now but clearly REITs are firmly on the horizon. We are just waiting for February 28 to see what tax loopholes are potentially plugged by the Budget speech.Sonia: The one reason why the stock is been under tremendous pressure has been the way your profits continue to get eaten by the high interest burden that you are under going. Even in this quarter gone by your debt has gone up to now more than Rs 20,300 crore. Can you give us a sense of how you plan to cut down this debt? In the analyst call you mentioned that you plan to sell assets worth Rs 3,000 crore but by when do you plan to do that? What are these assets that you are looking to sell?A: The Rs 20,000 crore debts is broken into about Rs 14,000 crore odd of debt is with the rental business, which in all fairness will get partially addressed as and when the REITs solutions get found. The Rs 6,000 crore odd is developmental debt that we have which is a stressing factor and in all fairness that has worsened slightly QoQ as the quantum of sales continues to be sluggish.It is to address that and to ensure that a) it stays range bound and b) it starts declining – So we are looking at selling these almost Rs 2,500- 3,000 crore of basically licensed FSI and we are not selling it necessarily we are working on getting private equity participation in 3 or 4 of our indentified projects in NCR and couple of ones in the south. It will be premature for me to specifically identify the projects but we are looking at closing at least some of these deals by the June end.Latha: DLF was barred from accessing capital markets, the last word has not come out from Securities Appellate Tribunal (SAT) so wouldn’t REITs also come under capital markets?A: They will, and hearing that SAT has been concluded we are waiting for their final decision. You are correct that some of these decision would have an interplay with what that final decision is and what the boundaries of this decision is so all of these will have to wait till that judgment comes out.Sonia: When is the final judgment expected?A: Hearings have been concluded we have been told but honest I cannot predict how long that judicial process will take.transcript to follow