DLF to focus on hotels, SEZ development

Delhi-based realty developer DLF expects to maintain strong operating profit margins in FY08.

Rajiv Singh, Vice-Chairman, DLF, expects volume growth to strengthen in times to come. The thrust in middle-income housing will take off next quarter, he said.

The company was cash flow positive and is focusing on hotels as well as SEZ development, Singh said. Revenues included money from sale of assets, he added.

Excerpts from CNBC-TV18’s exclusive interview with Rajiv Singh:

Q: Does the Rs 3,100 crore in revenues that you have clocked this quarter include any revenues or sales booked to DLF Assets?

A: They include revenues of sales booked to DLF Assets, in consistency with what we had started last year. As compared to last year, about 60% of operating profit has come from DLF Assets. In this quarter, that percentage is now under 50%. To that extent, the rest of operations have also started performing strongly this quarter.

Q: What exactly did DLF Assets contribute to revenues and operating profits?

A: For operating profit, it would have been under 50%. So, DLF Assets would have contributed around Rs 1,000 crore on an operating profit basis. Total revenue contribution would have been around Rs 1,600 crore.

Q: Could you break up the non-DLF Assets between residential and commercial for this quarter?

A: The bulk of them would be residential. Commercial revenues, which are retail revenues in a sense, are basically on a rental model. Retail revenues would not be in excess of Rs 250 crore and the balance would be residential.

Q: You spoke about annualized EPS of Rs 35. Do you think this is the kind of quarterly run-rate that you may have of revenues, about Rs 3,000 crore and Rs 1,500 crore in revenues and profit respectively? Can the numbers be extrapolated evenly for the remaining three quarters?

A: Ours is a lumpy business, so I hesitate to make that statement. We are not yet going on a vacation and hope to continue working for the next nine months. We hope to not only maintain that, but also to increase our mettle as we go forward.

Q: Are you saying, on a base case, that you can multiply the current quarter’s numbers by 4 and not be totally off the mark for full-year profit projections of Rs 6,000 crore?

A: I hope not to be totally off the mark. On the conservative side, pleasant surprises will await us in the quarters going forward. We are extremely optimistic about this year and the years ahead.

Q: Could you confirm whether the operating margin for this quarter has indeed been 56%? Are you saying that margins for the full year will be comparable give or take a bit?

A: Yes, give or take a bit. As our thrust into middle-income housing acquires more volume, margin dilution will naturally take place. This will be accompanied by a huge increase in revenues. This year, I don’t expect that to be significant, since we are just starting that. For this year, that statement may be generally correct.

Q: Of the Rs 1,600 crore in revenues that you booked from DLF Assets, from which properties would those revenues have come from.

A: These are from our office projects in Chennai, Hyderabad, and Gurgaon.

Q: The remaining Rs 1,500 crore has principally come from the residential area. Could you break it up between geographies?

A: At present, most of it would come from NCR and Gurgaon predominantly. A part of it has come in from Delhi. In terms of revenue, the break up would be about 60% and 40% for Gurgaon and Delhi respectively.

Q: What are the key projects that are coming on stream in terms of completion of projects? What would sales for the remaining three quarters be? Which are the major ones that you can highlight for the rest of the year?

A: We are starting several new large office complexes in Gurgaon, Kolkata, Nagpur, Ahmedabad, and Mumbai. That’s a major area. In offices, we will be opening a lot of new fronts within this year itself.

In retail, we have just started construction on our mall in Mumbai. This was the NTC mill land that we had won a couple of years back. That is a major move for us. Our mall in Gurgaon, which is the largest mall proposed in India, is now in active construction.

At present, we expect all our retail projects to be under construction. Moreover, we expect the first delivery of our new generation malls, within this financial year itself. In the late third quarter or early fourth quarter, we will see the first of these malls actually opening up and setting new standards for retail in India.

We will definitely be launching projects shortly in Bangalore, Chennai, and Indore. These are three centers where we will be launching in the near future. We hope to launch in and around Real Estate Chandigarh and other locations possibly in the third quarter.

Q: Do you hope that all of this will end up totaling something close to or in excess of Rs 12,000 crore in revenue for the full-year?

A: Yes, let’s see how things go. We are hoping to see interest rates stabilising and moderating. We are optimistic that things should be substantially better.

Source://moneycontrol.com