DLF may not gain much from stake sale in Aman Resorts

The stake sale in Aman Resorts may not have a significant impact on the earnings of real estate developer DLF. Despite several asset sales in the past, DLF's stock has halved in the past one year due to the company's weak operational and financial performance.

The overall realty demand in the NCR remains sluggish due to a subdued macro-environment. Sales at DLF were down 45% quarter-on-quarter in the three months to September.

Besides, the amount received from this sale is quite small in comparison to the total net debt of the company. At the end of September, DLF's net debt (total debt less cash) stood at Rs 19,500 crore.

DLF will receive about Rs 2,200 crore from the sale of Aman Resorts and save Rs 270 crore in interest. Compare this with the total interest it paid in FY13 - Rs 3,243 crore on a net debt of Rs 23,000 crore.

In the profit and loss statement, DLF accounted only Rs 2,314 crore as interest expense due to accounting method and its EBIT (earnings before interest and tax) was only Rs 3,100 crore, marginally above the interest expense.

By the end of FY14, DLF's net debt will be down to Rs 17,500 crore due to cash from asset sales, but the question is will it really help it improve earnings?



Since the beginning of FY09 till December-end FY14, company has monetised non-core assets worth Rs 8,700 crore. However, interest outgoes have continued to rise and earnings are declining.

Despite frequent asset sales over the past two years, DLF's interest outgo in the first six months of the current fiscal was one of the highest in its history, at Rs 1,200 crore. As against this, its adjusted net profit was only Rs 228.5 crore, lowest since its listing in 2007. Also, the net operating cash flows, excluding one-offs, in the first half were negative.