Fresh bookings of Rs 3500-4000 cr expected in FY16: DLF

For the March quarter, the company's consolidated net profit fell 22 percent year-on-year to Rs 172 crore and consolidated income by 17 percent to  Rs 2,101 crore.

Below is the verbatim transcript of Saurabh Chawla’s interview with Reema Tendulkar & Sonia Shenoy on CNBC-TV18.Sonia: How is the situation on the ground currently? You were indicating that FY15 was a very tough year for you but are you seeing any recovery at all in FY16 and what could the fresh bookings be for the year?A: It is very difficult to predict as we are not a quarter-by-quarter business. Our projects are of a little longer tenure and usually in the months falling in summer, there is a laxity in the sales because people are not in town. They are usually on a holiday. Sales actually picks up in the later part of the fiscal year so I would prefer to give emphasis or weightage to sales happening during Diwali, post Diwali and then to the fourth quarter.

That is where the real pick up happens. This has been consistent in our business also. Ever since we have been in the listed space, since 2007 you will also find our third quarter and fourth quarter sales truly reflecting the sales effort that company has taken forward.On an annual basis what we had articulated was that we will do fresh bookings of about Rs 3,500-4,000 crore during this fiscal year. This was in context to the current interest rates that exists in the country. Also there are certain micro market conditions  especially in New Gurgaon, so keeping that into perspective this is a number that we at this stage are guiding the markets too. If there is any change in this number, then we will obviously come and guide the markets accordingly.

Reema: Any fresh projects that are lined up or are there any existing projects from where you will generate Rs 3,000-4,000 crore this year?A: There are existing projects but they are on the next phase of launches. We do not sell our projects on the first day itself. We do it in phase wise manner as that helps us to match the cost elements that exist in a market place. These are the next phases of launches whether they are in the luxury space in the phase V of DLF or in other projects across the country.At this stage few other launches are on the design stage, but we would prefer to bring those to the market after we do some private equity. In those particular projects we would prefer to have a financial investor to come along with us because that helps us to keep the discipline and timelines on development of those projects. That is our strategy as far as our residential sales goes.Sonia: DLF managed to get a very good response on its luxury projects both on Camellias and Crest. Can you give us a sense of what is the unsold portion for these two projects that could result in revenues over FY16?A: I will not guide you on a quarterly basis as that is not our business but the unsold portion, the residual value from these two projects itself is an excess of about Rs 10,000 crore plus. My cost to develop those is about Rs 3,500 crore. So here we are talking about margins in excess of Rs 7,000 crore in these two projects itself. That reflects the strength of some of our marquee destination projects that at some point of time will come to the market. These are two of them in DLF phase V as of now.

Reema: What is the situation on the balance sheet front? In this quarter your net debt has gone up quite a bit. How much could you bring it down to by the end of this year?A: We are not uncomfortable with this net debt level. We are able to service this debt, we have the ability to get the requisite credit line to take it forward. We also need to distinguish between a development company debt (DevCo debt) and a rent company debt (RentCo). Out of the Rs 20,000 crore odd net debt, almost Rs 14,000 crore is attributable to our rent company. This particular aspect of debt will continue to grow. As my rental incomes continue to grow I will continue to securitise my rentals and this number will grow as we go forward. This is a very high quality debt which does not have any mismatches or refinancing risk.If I were to deduct this Rs 14,000 crore from the net Rs 20,000 crore odd what is left is about Rs 7,000 crore. If my sales volume pick up which we expect over the next 2 year for sure then the margins of my Crest and Camellias covers this DevCo debt. That is the strength we come in and that is how we work our planning process. Having said that, yes we would like to bring down the net debt number but that will be more on the DevCo side of a debt that is Rs 7,000-7,500 crore debt which will pair down.It will be predicated on better sales volumes that we will achieve eiher in this year or next year. Also new launches that we will do is linked to that but my RentCo debt as I said earlier will continue to go up. My RentCo debt may come down if we plan to go ahead and do the Real Estate Investment Trusts (REITs) which we are contemplating today in the fourth quarter of fiscal year that is what we think we should be ready by. If we are able to create the REIT platforms then my RentCo debt will also come off.

Sonia: So your DevCo debt will be covered from Crest and Camellias but what will your RentCo debt be by the end of FY16 if REITS does not fructify?A: That number would be about Rs 15,000 crore.Reema: Execution seems to be on track with nearly 13.50 million square feet delivered in FY15. How much are you targeting in terms of delivery, quantum, square feet and the number of apartments this year?A: We have not articulated a target for this particular fiscal year but it will be a number similar or more than this. As we speak we have more than Rs 10,000 apartments ready to be delivered during this current fiscal year. I do not have an exact million square feet number. However, I can get back to you on that aspect of it, but it will be a number which is similar to this particular year.Our focus has been very much on construction because we already have the locational attributes and to give the confidence to a consumers that I am not here just merely making a promise based on advertisement or a brochure, there is an actual execution happening on the ground for him to see that we have been focussing a lot on the construction side of it and this is despite of muted sales volume. This has over a period of time helped us to increase our sales in phase V and hopefully this model will flow through in other micro markets also.So the focus will be on execution. We are at various stages especially with respect to our legacy projects to complete them and deliver them during the current and next fiscal year. The real profitability of the new projects will start to emanate in this current fiscal year. So just to highlight my last fiscal year I did not capture my percentage of completion method (POCM) revenue and profit from Crest at all so that is a pretty large bump up that exists. So, in this fiscal year those will all start to flow into my accounting books which will reflect our numbers going forward.Sonia: How many million square feet will you look to sell by the end of FY16 and what could the rental bookings be, that is what could the leasing volumes be for FY16?A: Rental bookings will be in a same range of about a 1 million to 1.50 million square feet that is the leasing volumes that we expect during the current fiscal year. On the sales volumes side of it we had already reflected that on a steady state basis we will be doing about 7-7.5 million square feet of sales volume however, sales booking of about Rs 3.5-4 thousand crore.