India's DLF profit falls 19 pc; shares down

25 May, 2011

The weak results pushed the stock down nearly 5 percent in early trade on Wednesday, to its lowest level in two years. DLF shares were down 4 percent at 210.40 rupees.

DLF also plans to divest assets worth 60 billion to 70 billion rupees over the next two to three years as it looks to reduce debt, the company said in an analyst presentation.

Property prices in major Indian cities like Mumbai and New Delhi have more than doubled over the past 18 months, spurred by rising incomes and a firm stock market, but sales volumes are down by a third from a year ago as high prices and rising borrowing costs deter buyers.

India's central bank has been one of the most aggressive to tighten liquidity, raising rates nine times since March 2010, including a bigger-than-expected 50 basis point this month.

DLF said while demand from corporate and actual users in the residential & commercial leasing segments continued to be healthy, speculative demand has petered out and investment demand has slowed down as the financing cost equation worsens.

Rapid urbanisation and rising income levels are expected to boost demand for houses in Asia's third-largest economy, but high inflation and rising interest rates are negatives for the sector in the near term.

New Delhi-based DLF said consolidated net profit fell 19 percent to 3.45 billion rupees ($76 million) in the quarter ended March, as land costs tripling and DLF took a one-time charge due to price inflation.

Revenue in the quarter rose 34 percent to 28.7 billion rupees.

DLF had net debt of about 214 billion rupees at the end of March and the company said it had raised its overall target for non-core asset divestments to 100 billion rupees from 45 billion earlier.

DLF shares fell 5 percent to a 2-year low of 208.10 rupees in a Mumbai market that was down 0.5 percent. DLF shares have lost about a quarter of their value this year, underperforming a more than 12 percent fall in the Mumbai market.

The real estate sector index is down nearly 31 percent this year. Shares in property firms DB Realty and Unitech Ltd , whose top officials have been charged by federal police over their involvement in a huge telecoms licensing scandal, have lost 64 percent and 53 percent, respectively, this year.

Copyright Reuters, 2011

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