Brokerage firm Kotak Institutional Equities has downgraded Delhi Land and Finance, popularly known as DLF to 'Add' amid a high ask rate for its inventory of home and office space, and vacancy in its special economic zones that could defer full recovery. Kotak has quoted the stock's fair value at Rs.530 apiece.
The stock price has surged 42 percent in the last three months. The real estate major reported Rs.15,000 crore in sales, up more than 100 percent annually, primarily aided by the development business and improvement in occupancies for the leasing business.
Analysts at the broking firm have said that the ask rate, typically the selling price, is high if FY24 doesn't see a launch similar to Arbour, a Rs 7 crore luxury residence located in Gurugram set to be allotted in 2027, according to the construction giant's website. " While we remain constructive on the prospects of Gurugram in general as well as DLF in particular, we believe the ask rate gets more demanding hereon,” the Kotak note said.
The Arbour project sold more than 1,100 units worth Rs.8,000 crore within just three days of its launch. The size of the apartments is almost 3,900-plus sq ft, spread across 25 acres and comprising five towers. Buyers comprised a mix of NRIs, CXOs, entrepreneurs, lawyers, doctors, etc top officials at DLF told Moneycontrol in March.
Regulatory hurdles
Kotak has said that the bulk of vacancy comes from the SEZ area amid the absence of clarity on floor-by-floor de-notification, which may only come through in the second half of FY24. "We expect little improvement", the report added, referring to the vacancy stemming from SEZ.
The annuity business which has reported year-on-year 400 basis point increase in 4QFY23, could be on the receiving end as clients such as Cognizant plan to vacate 11 million square feet of office space in the country across asset owners. Upcoming assets such as DLF Downtown Chennai and DLF Downtown Gurugram are said to bring some relief to the annuity business.
At 10:30 am, DLF was quoting at Rs.495 per share, down 0.08 percent from the previous day's close on the National Stock Exchange (NSE).
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