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Analysis of Infrastructure Sector and DLF
Group 6:Ankit Gupta
Arjun VigArpit Verma
Dhara BadianiGaurav Jangid
Tejas Prabhu
Index
Industry
a) Global Overview
b) Indian Industry Overview
c) Segmentation of Infra sector
d) Segmentation of Real estate Sector
e) Competitive Landscape
f) PEST Analysis of the Sector
g) Regulatory Environment
h) Growth Driver of the Industry
i) Challenges Faced by the Industry
j) Outlook of the Industry
Company Profile
a) Company Overview
b) Geographical Segmentation Chart
c) Company History
d) Company Milestone
e) Financial Highlights
f) Segmental Result Analysis
g) Peer Group Analysis
h) Stock Chart Analysis of the Company
i) Board of Director/ Top Management/ Shareholding Pattern
j) SWOT of DLF
k) Financial Modelling
l) Major news
• Sales (incl Other Income) at `2520cr in Q2 FY 11, compared to ` 2161cr in Q1 FY11 representing growth of 16.8%
• Management expects margin to restore 45-50% mark, with the expected launch of high-value projects.
• Continues Debt de-leveraging - Management has target of approx ` 2000crs through disinvestment of non-core assets over next 12-18 months.
• Development and leasing volume continue uptick
• New launches hold key for stock performance
Investment Rational
Global Infrastructure Sector Scenario
Per capita expense on infra in India is 13$ and in China 116$. To build at a faster pace Govt. of
India expected to increase Infrastructure expense to 124$ by 2012.
Source:- Infra.snetglobalindexes
Indian Infrastructure Sector
Source:- RBI annual report
34%
2%4%
5%7%
14%
15%
19%
Infrastructure Investment in Billion US$ (2009)
Power
Aviation
Irrigation
Ports
Telecom
Highway
Railway
Other
• Infrastructure sector contributes 7.3% in GDP.
• Infrastructure industries, accelerated by 5.1% YOY in April 2010, compared with 3.7% in April 2009.
• Govt. Investment in Infra.-
11th 5 year plan- 425.2bn. US$
12th 5 year plan- 1000 bn. US$ E
• Investment of 1.1 bn US$ is expected through Private equity
As compared to 0.26 bn. US$ in year 2009.
• Acquisition of 44% in power generation investment group Asian Genco by global infra funds.
Source:- UMC& I, IBEF
Indian Infrastructure Sector
Source:- RBI annual report Source:- UMC& I, IBEF
• In April-June 2010, the infrastructure industries recorded a growth of 4.6%.
• Growth was led by an increase in the production of cement, which stood at 18.87 MT, compared to 17.36 MT during April 2009.
• Electricity production grew by 6 per cent in April 2010.
• Export From SEZ registered a growth rate of 92% from the previous year.
• Proposal to allow pension and provident funds to invest some of their capital in infrastructure.
-4
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Ove
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Growth in InfrastructureIndustrial
Avg. (2004-05 to 2008-09) 2008-09
2009-10 2010-11(Apr-June)
Indian Infrastructure Sector
Source:- infra.snetglobalindexes
Some major projects:
• National Highways Development Project (NHDP)
-Golden Quadrilateral 5846 Km
-NS-EW; 7,300 km
• Investment in Bharat NirmanPrograme Rs 1740 bn.
• Metro Rail projects in Mumbai, Bangalore, Hyderabad and second phase in Delhi.
• Building of international airports at Bangalore, Chennai and Hyderabad, and modernization of airports at Mumbai and Delhi would entail total investment of around Rs 400 bn.
0
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4
6
8
10
12
14
16
18
0
1000
2000
3000
4000
5000
6000
2006 2007 2008 2009 2010
Loan granted against Infra Projects by World Bank
US$ in Million No. of Projects
Segmentation of Indian Infra Sector
Power &
Energy
Wind
Thermal
Hydro
Solar
Nuclear
Geothermal
Transport
Airports
Railways
Roadways
Ports & Terminals
Urban Infrastructure
Highways
Roads
Tunnels
Flyovers
Bridges
Real Estate
Rasedential
Commercial
Complex
Malls &
Multiplexes
Oil &
Gas
Exploration &
Production
Distribution
Steel
Alloy Steel
Non Alloy Steel
Cement, Irrigation, Telecom are also some major sectors Come under the head of Infrastructure.
Segmentation of Real Estate Sector
• Business activity shifting from central business district to special business district and from tier 1 cities to tier 2 cities
Commercial Office space
• Broad categories include low cost, mid market and premium hosingResidential space
• Contribution of organised retail to the retail industry increased from 2 per cent in 2003 to 4 to 5 per cent in 2007.
• International retailers are present through the franchisee route
Retail space
• Classification on the basis of star rating —one-star to five-star deluxe.
• Number of approved hotel roomshas been estimated at 110,000 (including approved projects), 30 per cent of which are in the five-star segment.
Hospitality space
Competitive Landscape
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
63% of DLF’s next 5-year cash flows have
to come from future launches, only 7% for IBREL
Existing Booking Unsold out of Current development Future Launches
0
5
10
15
20
25
30
35
40
32-35% of next 5-years cash flows shall come from existing bookings itself for
Sobha and Unitech
% of next 5-year cash flow from existing bookings
Source:- DLF Data and Credit suiccess Estimates
• SEZ Act to Boost Infrastructure Development
• FDI Liberalization to Augment Industry Growth
• REITs and REMF’s Positively Affected Real Estate BusinessPolitical
• Growth in Construction Activity Stimulating GDP Growth
• Rate Hikes Unlikely To Slow Down GrowthEconomical
• Rising Urbanization to Boost Industrial Growth
• Green buildings in IndiaSocial
• Low Technology Adoption to Hinder GrowthTechnological
PEST Analysis of Real Estate Industry
Regulations relevant for the Real Estate Sector
• No regulatory authority in the real estate sector till now
• The Union Ministry of Housing and Urban Poverty Alleviation (“Ministry”) has published the
draft Model Real Estate (Regulation of Development) Act (“Model Act”).
• The Model Act proposes to establish a regulatory authority to control and promote
construction, sale, transfer and management of colonies, residential buildings, apartments
and other similar properties.
• This bill is pending since last five years because it is opposed by developers and Government
of some of the states.
Regulatory authority
Source: mhupa.gov.in
Salient Features of the Act
• Establishment of a Real Estate Regulatory Authority – a chairman and two members in the field of public administration
• The Model Act provides for compulsory registration of all real estate projects where:
– the area of land proposed to be developed exceeds one thousand square meters; or
– the number of apartments proposed to be constructed exceeds four.
• Promoter’s obligation:
– submit details of the approved projects along with a bank guarantee
– Advertise only after registration
– provide details of the number and size of plots, layout plans, carpet area and plinth area of flats, etc
– Violation of rules may lead to cancellation of registration after verification
– complete the project in accordance with the conditions of registration
• Transparency and Powers of the Regulatory Authority:
– host the website of records of all real estate projects in its jurisdiction
– the power to decide any dispute between a Promoter and an allottee
Establishment of Appellate Tribunal
Offences & Penalties - penalties range from up to three years imprisonment for not registering a project or for not complying with the orders of the Appellate Tribunal to monetary penalties
Source: accomodationtimes.com/real-estate-news/
Guidelines for FDI in Real Estate Sector in India
Conditions for Development
Conditions for Investment Other Conditions
Minimum 10 hectares to be developed for serviced housing plots.
Minimum capitalization of US$ 10 mn. for wholly-owned subsidiaries and US$ 5 million for joint ventures with Indian partners
Investor is not permitted to sell undeveloped plots
For construction-development projects, minimum built-up area of 50,000 sq. mt. Prescribed
Infusion of funds within 6 months of commencement of business
Project to conform to norms and standards laid down by respective state authorities.
In case of a combination project, any one of the above two conditions should be met.
Original investment cannot be repatriated before a period of 3 years from completion of minimum capitalization.
Investor responsible for obtaining all necessary approvals as prescribed under applicable rules/bye-Iaws/regulations of the state.
At least 50 per cent of the project to be developed within five years from the date of statutory clearances.
Investor may be permitted to exit earlier with prior government approval.
Designated authority to monitor compliance of above conditions by developer.
Union Budget 2010—impact on Real Estate
Policy Impact Direct Tax Impact Indirect Tax Impact1. Interest subvention on
housing loans —a scheme was introduced by the Finance Minister in the Union Budget2009–2010, which allowed an interest subvention of1 % on housing loans of up to US$ 20,833 (INR 1 million), provided the cost of house does not exceed US$ 41,666 (INR 2 million). This scheme has now been extended up to 31 March, 2011.
2. Allocation for housing and urban poverty alleviation has been raised from US$ 177 million (INR 8.5 billion) to US$ 208 million (INR 10 billion) for 2010–11.
1. Threshold slabs for individual taxation broadened, which is expected to result in more disposable income in the hands of the consumers.
2. Corporate tax rates remain unchanged. However, surcharge in the case of a domestic company having income above INR 10 million reduced from 10% to 7.5%.
3. Minimum alternate tax (MAT) hiked from 15% to 18%.
4. Turnover threshold limit for getting accounts audited (under section 44AB) has been relaxed to US$ 12,500 (INR 6 million) from the existing limit of US$ 83,333 (INR 4 million).
1. Service tax rate maintained at 10.3%.
2. Relevant definition of taxable service, provided in relation to renting of immovable property, has been amended with retrospective effect from June 2007 to clarify that renting of immovable property would constitute a taxable service.
3. Service tax to be levied on lease of vacant land if the lesser undertakes construction on such land for furtherance of business or commerce during the tenure of lease.
4. Peak excise duty rate has been increased from 8% to 10%. Accordingly, peak effective customs duty rate has been increased from 24.42% to 26.85 %.
Impact of Regulations on the Business of the Company
• Entry of new players will be difficult because the bill has lot of restrictions and barriers
• DLF will have to follow all the norms and regulations otherwise the penalties which it will
have to suffer are large
• The project delays will occur if bill is implemented because under the bill lot of procedural
work has to be done before starting a project.
Demand Pull Factors
Robust and sustained macro-economic growth.
Upsurge in industrial and business activities, especially new economy sectors.
Favorable demographic parameters
Significant rise in consumerism.
Rapid urbanization.
Availability of a range of financing options at affordable interest rates.
Impact
Increasing occupier base.
Significant rise in demand for office/industrial space.
Demand for newer avenues for entertainment, leisure and shopping.
Creation of demand for new housing.
Supply Push Factors
Policy and regulatory reforms (100 per cent FDI relaxation).
Positive outlook of global investors.
Fiscal incentives to developers.
Simplification of urban development guidelines.
Infrastructure support and development initiatives by the government.
Impact
Entry of a number of domestic and foreign players; increasing competition and consumer affordability.
Easy access to project financing option
Increases developers’ risk appetite and allows large scale development.
Improved quality of real estate assets
Development of new urban areas and effective utilization of prime land parcels in large cities.
GROWTH DRIVERS
Source: DLF Annual Report, IBEF
Growth Drivers of Indian Infra Sector
Commercial Office Space:
• Growth in IT/ITES sector at 30% annually .
• Significant growth in FDI.
• Growth of Indian Logistic Industry by 15-25%.
• Growth of Telecomm Industry in rural India.
• Growth of automobile industry.
Residential Space:
• Rapid Urbanization: Urban Population expected to touch 0.5 bn. by 2030
• Increasing working age population (Almost 64% in 16-64 age group)
• Easier access to mortgage, long tenure loans and tax incentives.
• Rising income of middle class.
Growth Drivers of Indian Infra Sector (Contd.)
Govt. is increasing Public Private Partnership in Infrastructure sector.Till now the Govt./Private partnership is 7:3.
Retail Space:
• Rising consumerism with doubling of disposable income.
• Growth in organized retailing.
• Entry of international retailers.
• Penetration in small cities.
• Increasing Number of multiplexes.
Hospitality Space:
• International events such as Commonwealth Games, cricket world cup.
• Low cost airlines.
• India requiring recognition as a medical tourism destination.
• Growth of Indian truism industry.
• Construction of roads.
• Targets not getting translated to steady pipeline of projects because of limited institutional capacity
• Multiple Approvals
• Overlap of Jurisdiction
Institutional Capacity
• Underdeveloped Debt Capital Markets
• Pension/Insurance Sector to be opened up
• Shortfall in Equity Capital with local sponsors
Availability of Capital
• Land acquisition issues
• Delayed permits & clearances
Execution Challenge
• Lengthy dispute resolution mechanismDispute
Resolution
Challenges Faced by Indian Infrastructure Sector
Source:- IDEF
94
427
281272
15433
288
150
Projected need for Infrastructure Spending 2010-19, US$, Bn.
Ports Roads
Railways Irrigation
Water Supply Airport
Power Internet and Telecom
Outlook of Indian Infrastructure Sector
Infrastructure Investment 2010-2019 will be 1700 bn. US$ is expected.
24 27 28 3239
46
58
94
115
143
3.00%
4% 4% 4% 4%4.20% 4.50%
7%
8%
9%
4.90%
5.60%
6.30%
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
10.00%
0
20
40
60
80
100
120
140
160
35% CAGR is Expected for next 3 Year
Infrastructure spending Current Growth Rate
Expected Growth Rate
Source:- Invesco
Outlook of Indian Infrastructure Sector
• Govt. will increase investment in infrastructure from 6.2% of GDP in 2009-10 to 9% by
2013-14. (according to finance minister)
• IIFCL to refinance 60% of commercial bank loans for PPP projects in critical sectors over the
next 15-18 months.
• Commercial market expected to grow at CAGR of 20-22% over the next 5 years.
• IT/ITES sector expected to require in excess of 0.2 bn. sq. ft of commercial office space by
2012-13.
• Current shortage close to 0.03 bn. units, predominantly in middle and low income group.
• Expected to grow at CAGR of 18-19% up to by 2010.
• Service Apartments, Hostels, Wellness space gaining popularity.
Index
Industry
a) Global Overview
b) Indian Industry Overview
c) Segmentation of Infra sector
d) Segmentation of Real estate Sector
e) Competitive Landscape
f) PEST Analysis of the Sector
g) Regulatory Environment
h) Growth Driver of the Industry
i) Challenges Faced by the Industry
j) Outlook of the Industry
Company Profile
a) Company Overview
b) Geographical Segmentation Chart
c) Company History
d) Company Milestone
e) Financial Highlights
f) Segmental Result Analysis
g) Peer Group Analysis
h) Stock Chart Analysis of the Company
i) Board of Director/ Top Management/ Shareholding Pattern
j) SWOT of DLF
k) Financial Modelling
l) Major news
Company Description
Source:- DLF annual report
DLF Ltd. is India’s largest Real Estate Company.
DLF has a 62-year track record of sustained growth, customer satisfaction, and innovation.
Group has over 0.2 bn. sq. ft. of existing development and 748 million sq. ft. of planned projects.
DLF Group was founded in 1946 and was incorporated in the year 1963 as American Universal Electric (India) Limited.
The company has a pan-India presence with operations in more than 30 cities. The company has 79 subsidiaries.(*2007)
Number of employees 2478 (*2007)
Listing on BSE and NSE in the year 2007.
DLF
OFFICE
HOTELS
HOME
INFRASTR-UCTURE
SHOPING MALLS
LEISSURE & SEZ
Geographical Distribution Chart DLF has “Pan India Coverage”
Source:- DLF Investor presentation
Company Business Break-up
DLF
CORE BUSINESS
HOME
OFFICE
SHOPPING
NEW BUSINESS
HOTELS
INFRASTRUCTURE
EXECUTION ENABLERS
LOR JV
WSP JV
INVESTMENTS
PRUDENTIAL JV
FUNDS
Source:- DLF annual report
Company History and Milestones
Company History and Milestones (2006-09)
Source:- DLF Investor Presentation, Money control
1.Focus on IT parks and next generation
malls.
2.Significant progress in new business- Hotels
and Large township
1.DLF enters into a joint venture with
Prudential Insurance to undertake life
insurance business in India
2.listing on NSE and BSE
1.DLF and TIDCO entered into an agreement for
development of IT SEZ
2.Commenced operations of India's
first Luxury Mall -Emporio Clinches
3.Title Sponsorship of IPL
Foundation stone laid for DLF-IL&FS
Metro In Gurgaon -India's first public
rail transport system to be built & run by a private Company
2007 2008 20092006
• DLF’s total sales increased by 262% in FY08. In FY09 and in FY10 due to recessionary pressure total revenue was declined.
• DLF’s EBITDA increased by 243% in FY08. In FY09 and in FY10 due to recessionary pressure total revenue was declined.
Financial Highlights
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FY 07 FY O8 FY 09 FY 10
Total Sales
Total Sales YOY
-100%
-50%
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100%
150%
200%
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300%
0
200000
400000
600000
800000
1000000
1200000
FY 07 FY O8 FY 09 FY 10
EBITDA
EBITDA YOY
Source:- DLF annual report
• PAT is increased in FY08 by 304% and in Fy09 and FY10 .PAT is declined due to recession and lower sales.
• During Recession all the infra companies were facing heavy debt situation. Interest paid on debt is clearly indicating the high debt situation and DLF is going through debt restructuring.
Financial Highlights
Source:- DLF annual report
0%
20%
40%
60%
80%
100%
120%
0
20000
40000
60000
80000
100000
120000
FY 07 FY O8 FY 09 FY 10
Interest paid on Debt
Interest YOY
-100%
-50%
0%
50%
100%
150%
200%
250%
300%
350%
0
100000
200000
300000
400000
500000
600000
700000
800000
900000
FY 07 FY O8 FY 09 FY 10
PAT
Profit After Tax YOY
Segments of DLF
Overall Segments
• Land (including development rights), plots and Constructed properties
• Retail chain outlets
• Food court / restaurant business
• Hotel business
• Power generation
• Cable operations
• Cinemas operations
• Recreational facility
• Insurance business
• DLF-Pramerica Asset Managers Private Limited
Real Estate
• Development Business
• Homes
• Commercial Complexes
• Annuity Business
• Rental businesses of offices
• Retail
• Infrastructure
• SEZ
• Hotel
• Leisure
Source:- DLF annual report
Segmental Revenue Analysis
Revenue from segment ( in mn.) 2007 2008 2009 2010
Land (including development rights), plots and Constructed properties(mn.) 13,725.89 77,641.42 45,357.49 55,524.00
Retail chain outlets (mn.) - - 15.05 229.30
Food court /Resto. business(mn.) - 74.64 109.75 234.32
Hotel business(mn.) - - 2,996.23 2,271.28
Power generation (mn.) 996.82 1,252.06 2,573.25 2,616.13
Cable operations(mn.) 34.93 11.40 - -
Cinemas operations (mn.) 123.81 100.99 138.09 521.48
Recreational facility (mn.) 233.94 250.58 306.96 283.47
Insurance business(mn.) - - 117.24 473.85
Rent 1,546.45 2,847.18 5,054.20 7,245.64
Revenue and Percentage Growth of DLF
• During the fiscal 2008-09, DLFconsolidated revenues of Rs. 10,431Crores for FY09 down by 29% from Rs.14,684 Crores for FY08
• The decline in revenue was primarily onaccount of limited new sales and freshleases as a result of lower demandwitnessed in the year
Financial Year
Total Revenue (in mn.)
Growth (in %)
FY 07 26,374 43.7%
FY 08 144,375 447.4%
FY 09 100,354 (30.5%)
56%
23%
13%
8%
Development Potential by Geography wise
Super Metros
Metros
Tier I71%
16%
6%7%
Development Potential By Business Unit
Home
Office
Retail Malls
Commercial Complex
DLF Land Under Acquisition Quarter wise (msf)
7.5 12.1 16.3 15.4 14.4
16.2 2531.6 33.4
38.8 38.3
0
10
20
30
40
50
60
70
F3 Q08 F4 Q08 F1 Q09 F2 Q09 F3 Q09 F4 Q09 F1 Q10 F2 Q10 F3 Q10 F4 Q10 F1 Q11
resident
Retail
commercial
0
50
100
150
200
250
300
2008 2009 2010E 2011E 2012E
Demand Pan India Basis
Commercial Residential Retail Hospitality
•In all the quarters after Q308 there is consistent growth in square feet sales.•Projected that Growth of sales in residential , retail and commercial property will remain further. Demand projections are shown in the chart
Source:- Morgan stanlay Report
Source:- Cushman & Wakefi eld Research
DLF: Segment wise Future Prospects
Home- DLF is planning to follow cautious approach in this segment as economic conditions
stabilize, it plans to make selective new launches based on targeted market research in different markets to catch the changing demand scenario
- Company is well established in North region therefore it has slowly started to move towards Southern part of India for its new projects like Westend Heights in BTM, Bangalore, Green Estate in DLF Nandigama, Hyderabad, as it wants to operate pan India basis
- The Company will continue to focus on affordable housing with test launches across newer locations, along with launching some strategic “city-center” housing projects
Office- The Company would like to expedite execution and deliveries wherever backlog
exists and heighten the construction activity based on visibility of pre-leasing. The strategic locations of Company’s land resource for office development and excellent client relationships over the years will enable it to increase its leasing activity as and when the markets improve and corporate revive their expansion plans
- Uncertainty on DTC impacting IT SEZs in the near term
DLF: Segment wise Future Prospects
Retail- Focusing on the sales model, DLF plans to make selective launches of commercial
complexes across the country with plans to launch 1-2 m.s.f. It will also seek to further enhance the existing standards of mall management for success in
retail malls- The Company will continue to focus on execution of projects which are pre-sold to
meet its commitments- Clarity on FDI policy in multi-brand retail could be potential trigger for growth
Hotels- considering the worst market condition in the second half of 2008-09, the company
suspended all its hotel projects till the economic conditions and the industry revives- However, the first hotel under the DLF-Hilton JV, the Hilton Garden Inn Saket in Delhi,
which got delayed due to certain regulatory approvals, is now expected to open in second quarter of FY10
DLF: Segment wise Future Prospects
DPIL (DLF Pramerica Life Insurance Company Ltd.)
•Increase the agency sales force deeper into the Punjab, Haryana and NCR markets. TheCompany also plans to enter select new states in the current year
•Establish third party distribution and form select deep partnerships. The Company will customize products and operating processes to provide superior customer service to third party distributors and Expand the product suite by introducing market-leading products
DLF- Pramerica Asset Managers Private Limited
•The Company will provide a broad array of mutual fund and investment products, including domestic and eventually international mutual funds to Indian retail and institutional clients•
•The AMC has received in-principle approval from SEBI and is awaiting approval to commence business
Q1 FY11 Future Highlights
• strengthening of cash flows / profitability via -- Right pricing strategy- Budgetary controls- Value engineering- Timely execution / deliveries- Material Inflation could impact EBIDTA margins going forward
•Focus on non-core asset divestment to continue, leading to rationalization of core real estate portfolio•Given stable cash flows, Company is comfortable with a debt equity of 0.75x. On a longer term sustainable basis, this ratio is expected to be lower for FY11 targeting between 0.4x -0.5x
Future Strategy of DLF
Selling it`s investment in hotels and wind powerExit it`s long gestation projectAffordable housing for middle income groupShifting from north to other regions of the countrycompany is planning to give more focus on mid-income group,tier-2 city. Major revenue will be generating from this new segment•FY11 targeting between 0.4x -0.5x
New Geography DLF Planning to Venture into
•DLF is making lot of investment in SEZ in cities like pune, chandigarh,banglore
•Launching residential project at discounted price at tier-2 cities like Indore, chandigarh, central
Delhi
•Expanding luxurious project in super metro cities like mumbai
•Boom in IT sector increased demand of offices in cities like pune, hydrabad, NCR, kolkata
Peer Group Analysis
54%
10%
9%
7%
4%
4%
4%3% 3% 2%
Market Cap. (in Cr.)
DLF DB Realty
HDIL Indiabulls Real
Suntech Realty Anant Raj Ind
Ackruity city Godrej Property
Sobha Developer Parsvnath
•All the Real Estate and Construction Companies are in heavy Debt situation and they are continuously working to improve their Balance sheet.•DLF is going through heavy Debt Situation and Continuously Liquidating.
Source:- DLF Annual Report
Market Share
DLF
Unitech
Ananthraj
Paservanth
Godrej
Company
Market Cap P/E (TTM) P/BV (TTM) EV/EBIDTA ROE ROCE D/E
(Rs. in Cr.) (x) (x) (x) (%) (%) (x)
DLF 48,114.22 49.95 3.75 33.98 6.1 7.5 0.88
JP Associates 21,817.38 35.76 2.66 11.5 13.5 11.1 2.13
Unitech 16,161.82 27.71 1.85 21.17 9.9 9 1.15
Jaypee Infratec. 9,111.38 7.1 2.49 0 30.1 10.9 2.34
H D I L 7,916.13 10.04 0.93 10.78 10.4 12.7 0.71
IRB Infra.Devl. 7,267.05 122.49 5.3 143.77 3.5 3.1 0.29
Prestige Estates 5,546.02 39.16 3.03 0 25.4 13.9 1.93
Indbull.RealEst. 5,217.37 116.07 0.81 74.54 0.3 1.3 0.14
D B Realty 4,890.74 21.51 1.58 42.47 11.4 10.3 0.27
Godrej Propert. 4,149.79 32.45 5.09 17.37 2.6 8.5 0.81
Nag. Constructn. 3,635.31 17.73 1.62 9.15 10.2 14.9 0.71
Punj Lloyd 3,531.88 0 0.99 11.38 11.9 10.7 1.04
Peer Group Analysis
Source:- India Infoline
Indexed Stock Chart (taking 1st sep. 2009 as 100)
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180.00
Infra DLF Unitech CCCL S&P CNX NiFTY
Stock Split
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Infra DLF
News-Interest rates increase due to increase in inflation
Despite off Buyback of Rs. 11 bn. Started on 18/10/09 Market still fall
Q2 result: PAT raised by 22.45%.And heavy purchase in foreign funds
Q3 FY10: Net profit down by 32.84%
DLF increased prices and interest rates also gone up
FY10 results out: revenue on sales is below than expected
Speculative Up move: talks on relaxation in FDI norms
Q1 FY11 result: Net profit rise by 104%, Co. announced dividend
further clarification see notes
RBI increased repo rate and reverse repo rate by 25 basic
RBI raises CRR by 75 basic point to control liquidity
Annotations for DLF Ltd.
Annotations for Infrastructure Index
0.00
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120.00
Infra DLF
Core Infra sector grew by 5.5% (acc. to IIP)
Source: further clarification see notes
RBI created NBFC to bring down lending rate for sectors And raised limit on Cap
RBI withdrew emergency liquidity support granted at Global crisis
RBI increased repo and reverse repo rate by 25 basic point
Interest rate increased due to increase in inflation
RBI increased CRRby 75 basic pointIn two installments
RBI hiked repo rate and reverse repo rate by 25 basic point to control inflation
Govt. released GDP expected to increase by 7.5%. Heavy purchase in FDI recorded
Share Holding Pattern
0
10
20
30
40
50
60
70
80
90
0
200,000,000
400,000,000
600,000,000
800,000,000
1,000,000,000
1,200,000,000
1,400,000,000
1,600,000,000
Promoters Institutional Non-Institutional
Share Holding Pattern
Total No. of Shares
Total Shareholding as a % of total No. of Shares
Mutual Funds / UTI
2%
FI / Banks2%
Insurance Companies
1%
FII95%
Institutional Holding
Source: BSE India
Major Share of DLF is held by Promoters and institutional investors. In institutional holding majority part 95% is held by Foreign Institutional investors.
Name Designation
K P Singh Chairman / Chair Person
T C Goyal Managing Director
Kameshwar Swarup Group Exe.Director
D V Kapur Non Executive Director
M M Sabharwal Non Executive Director
B Bhushan Non Executive Director
Rajiv Singh Vice Chairman
Pia Singh Whole Time Director
G S Talwar Non Executive Director
K N Memani Non Executive Director
Ravinder Narain Non Executive Director
N P Singh Non Executive Director
Top Management
Source: DLF Website
SWOT Analysis DLF
Strengths:• Brand value
• Huge supplier base ensures a fixed raw material cost.
• Experienced and dedicated management
• Strategic locations
• Scales of operations
• Robust business model with developmental and rental earnings
• Pan-India presence across 32 cities with presence in all segments of the real estate market
• 70 Fortune 500 clients out of a total of 110 corporate clients
Weakness:• No parallel products to support during times of bad economy( Not Diversified).
• Heavily dependent on the performance of the real estate market and real estate financing
Threats:• Increasing competition from regional players
• Economic condition adversely affecting housing demand
SWOT Analysis DLF
Opportunities:
• Expansion of business in other parts of India.
• It can invest more in power generation projects like Hydro electric or Wind power
• Investment in Raw material - Backward Vertical Integration
• Organized retailing would require around 350-400 msf of retail real estate in India by FY2016.
Market structure in which DLF operates
• Long gestation period• Homogeneous but differentiated products• High entry barriers• Few dominant firms
Financial Modelling Assumptions
• NAV method of valuation is used for computing the value of DLF
• DLF has four business segments, namely residential, office, retail & commercial complexes and hotels
• The company has plans to develop a total of 423 mn sq. ft. over the next 10-11 years
• Currently, DLF has 290 mn sq. ft. (68% of total area) of land resources targeted at the residential business, 29% for offices, retail and commercial complexes, and the balance 3% for hotels
• The price realization has been assumed at a discount of 35% to the peak rate for residential and 30% to rentals. Further an inflation rate of 4% in FY11 and 6% p.a. post FY11 has been assumed, irrespective of the verticals/regions
• For arriving at the market value of commercial and retail assets, a cap rate of 11.4% for office space and 12.3% for retail and commercial complex projects has been assumed
• Continued focus on margins to impact cash flow generation
Financial Modelling (DLF’s March 2011 NAV )
Particulars Mn sq ft Price per sq ft Value (Rs. Mn) Rs. per share
Residential 285 887.16 252839.75 148.29
Commercial complexes and Retail sale 28 2705.75 75761.00 44.43
Commercial and retail lease 85 2289.71 194624.93 114.15
Rental Assets 19 7955.68 151158.00 88.66
Plots 7 4114.29 28800.00 16.89
Real Estate GAV 424 17952.58 703183.66 412.42
Less: Land cost to be paid (15840.00) (9.29)
Real Estate GAV after land cost 687343.66 403.13
Less: Net Debt (210314.00) (123.35)
Less: minority interest in DCCDL (52647.00) (30.88)
Real Estate NAV after net debt 424382.66 248.90
Add: Valuation of other assets
Wind power 11350.00 6.66
Aman Resorts 20000.00 11.73
Hotel sites 18770.00 11.01
Land held for disposal 17000.00 9.97
Total of other assets 67120.00 39.37
March 2011 NAV of the firm 491502.66 288.27
No. of shares outstanding as on 31st March 2010 (No. in million) 1705
FOR THE YEAR ENDING -------> FY O8 FY 09 FY 10
Revenue
Land and Plots 269,603.21 36,368.35 11,466.91
Constructed Properties 531,816.80 417,188.54 443,125.51
interest income 25,102.65 39,597.01 42,802.62
Development Charges 534,498.95 394,465.94 100,656.61
income from other sources 78,897.87 104,973.90 114,581.20
Rental Income 28,471.75 50,541.95 72,456.93
Total Sales 1,468,391.23 1,043,135.69 785,089.78Expenditure
Net Material Cost 399,975.65 322,949.48 257,953.74
Rent 2,374.36 4,236.52 4,952.29Rates and taxes 1,836.15 1,553.04 2,111.54
Power & Fuel 316.24 2,703.49 1,641.39
Repairs and maintenance:
Building 64.78 472.58 760.53
Constructed Properties 53.07 173.05 462.83
Machinery 1,301.22 1,472.88 1,022.78
Others 1,419.70 2,692.33 3,257.16
Other Manufacturing Expenses 28,574.90 46,542.73 48,204.91
Total Manufacturing Expenses 435,916.07 382,796.10 320,367.17
Administrative expenses 29,978.00 45,367.91 46,677.45
Selling Expenses 6,348.95 16,373.02 24,085.34Total Expenditure 472,243.02 444,537.03 391,129.96
EBITDA 996,148.21 598,598.66 393,959.82
Depreciation 9,005.81 23,896.40 32,493.28
EBIT 987,142.40 574,702.26 361,466.54
Interest 30,999.98 55,483.69 111,003.91
Profit Before Tax (PBT) 956,142.42 519,218.57 250,462.63
Tax 173,908.73 67,535.89 70,224.92
Profit After Tax 782,233.69 451,682.68 180,237.71
Profit and Loss Account
Financial Year 2008 2009 2010
SOURCES OF FUNDSEquity Capital 34095.95 33943.74 33947.82Preference Capital 94958.2 139598.2 591986.17Reserves and Surplus 1,839,774.12 2,241,839.82 2417338.5Net Worth 1,968,828.27 2,415,381.76 3,043,272.49 Minority Interest 38946.94 63362.66 62,777.51
Long Term Debt 939797.15 1316076.15 1712881.72Short Term Debt 281077.57 315937.15 454783.27Total Debt 1,220,874.72 1,632,013.30 2,167,664.99
Deferred Tax Liability 3,589.10 25,149.11External Funds 2484285.48 3327389.26 4,423,256.60
Total Liability 4,453,113.75 5,742,771.02 7,466,529.09APPLICATION OF FUNDS
Fixed Assets:-Gross Block 516255.9 848668.83 1788445.59
Less: Accumulated Depreciation 34349.11 57429.53 132645.83Net Block 481906.79 791239.3 1,655,799.76 CWIP 518404.24 568820.11 1112881.95
Goodwill 209306.73 226508.5 126798.91Total Fixed Assets 1209617.76 1586567.91 2895480.62Investments 91020.21 140249.67 550519.96Deferred tax (net) 4139.12
Current Assets:Cash 214213.55 119561 92,823.22
Inventories 945440.08 1,092,824.24 1,248,059.10Debtors 197799.67 216482.15 161,896.41
Loans and Advances 736864.02 971199.46 759,330.10Other Current Assets 565690.86 762,173.69 468,467.44Total Current Assets 2,660,008.18 3,162,240.54 2,730,576.27
Less: Current Liabilities 433228.5 414043.61 463696.91Less: Provisions 295178.62 368395.91 414015.84
Total Current Liabilities 728407.12 782439.52 877712.75Net Current Assets 1,931,601.06 2,379,801.02 1,852,863.52
Total Assets 3,232,239.03 4,110,757.72 5,298,864.10
Balance Sheet
Key Ratios
Year end Mar 31 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10 FY 11
Growth (%)
Revenue 20.20 201.90 43.70 447.40 (28.96) (24.74) 46.20
EBIDTA 38.70 345.90 98.60 552.10 (42.50) (37.40) 54.40
PAT 60.40 374.20 371.40 304.00 (42.80) (59.30) 43.60
EPS 60.40 (56.00) 307.50 262.40 (42.50) (61.30) 50.90
MARGINS (%)
EBIDTA/Revenue 27.70 40.90 56.50 67.30 55.70 47.20 49.80
EBIT/Revenue 25.10 45.70 108.00 68.40 57.30 48.60 47.00
PAT Revenue 14.20 22.30 73.30 54.10 44.50 24.50 24.10
Other Metrics
Net debt/Equity 1.18 3.11 3.63 0.53 0.65 0.65 0.65
ROCE (%) 14.80 23.20 6.00 13.60 5.50 7.20
ROAE (%) 12.40 46.70 106.80 72.00 21.20 7.40 10.00
Book Value per share (Rs.) 56.90 1.20 11.30 99.90 124.50 142.70 153.30
Impact of IFRS Convergence
• Development business will be impacted highly because under I GAAP the revenue was collected on POCM, but under IFRS, the revenue is shown only after the property is transferred to buyer. So this is likely to impact the company negatively
Revenue Recognition
• Under I GAAP the investment properties are classified as fixed assets and the assets are depreciated over time but under IFRS no such classification is allowed. The properties should be stated at fair value and any gain / loss should pass through income statement. P & L can become highly volatile
Investment Properties
• The change in revenue recognition method will impact the revenue because net income will be negatively impacted
Taxation
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