Analysis of Infrastructure Sector

and
DLF

Group 6:
Ankit Gupta
Arjun Vig
Arpit Verma
Dhara Badiani
Gaurav Jangid
Tejas Prabhu
 Index

Industry Company Profile

a) Global Overview a) Company Overview
b) Indian Industry Overview b) Geographical Segmentation Chart
c) Segmentation of Infra sector c) Company History
d) Segmentation of Real estate Sector d) Company Milestone
e) Competitive Landscape e) Financial Highlights
f) PEST Analysis of the Sector f) Segmental Result Analysis
g) Regulatory Environment g) Peer Group Analysis
h) Growth Driver of the Industry h) Stock Chart Analysis of the Company
i) Challenges Faced by the Industry i) Board of Director/ Top Management/
j) Outlook of the Industry Shareholding Pattern
j) SWOT of DLF
k) Financial Modelling
l) Major news
 Investment Rational

• 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

 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

Infrastructure Investment in Billion

US$ (2009)
• Infrastructure sector contributes
7.3% in GDP.
• Infrastructure industries, accelerated
by 5.1% YOY in April 2010, compared
19%
with 3.7% in April 2009.
34% • Govt. Investment in Infra.-
11th 5 year plan- 425.2bn. US$
15%
12th 5 year plan- 1000 bn. US$ E
• Investment of 1.1 bn US$ is expected
14% 5%
7% through Private equity
2%
4%
As compared to 0.26 bn. US$ in year
Power
Aviation
2009.
Irrigation • Acquisition of 44% in power
Ports generation investment group Asian
Telecom
Genco by global infra funds.
Highway
Railway
Other

Source:- RBI annual report Source:- UMC& I, IBEF

 Indian Infrastructure Sector

12
Growth in Infrastructure
10 Industrial • In April-June 2010, the
infrastructure industries recorded
8 a growth of 4.6%.
• Growth was led by an increase in
6
the production of cement, which
4 stood at 18.87 MT, compared to
17.36 MT during April 2009.
2 • Electricity production grew by 6
per cent in April 2010.
0
• Export From SEZ registered a
Crude Oil

Petroleum Refinery

Finished steel

growth rate of 92% from the

-2
previous year.
Products

(carbon)
Electricity

-4 • Proposal to allow pension and

Coal

Cement

Overall

provident funds to invest some of

their capital in infrastructure.
Avg. (2004-05 to 2008-09) 2008-09
2009-10 2010-11(Apr-June)

Source:- RBI annual report Source:- UMC& I, IBEF

 Indian Infrastructure Sector

Loan granted against Infra Projects

by World Bank Some major projects:
6000 18 • National Highways Development
16 Project (NHDP)
5000 -Golden Quadrilateral 5846 Km
14
-NS-EW; 7,300 km
4000 12
• Investment in Bharat Nirman
10 Programe Rs 1740 bn.
3000
8 • Metro Rail projects in Mumbai,
2000 6 Bangalore, Hyderabad and
second phase in Delhi.
4
1000 • Building of international airports
2 at Bangalore, Chennai and
0 0 Hyderabad, and modernization of
2006 2007 2008 2009 2010 airports at Mumbai and Delhi
would entail total investment of
US$ in Million No. of Projects
around Rs 400 bn.

Source:- infra.snetglobalindexes
 Segmentation of Indian Infra Sector

Power & Urban Oil &

Transport Real Estate Steel
Energy Infrastructure Gas

Wind Airports Highways Exploration Alloy

Rasedential & Steel
Railways
Thermal Roads Production Non Alloy
Roadways Commercial Steel
Hydro Tunnels Complex Distribution
Ports &
Solar Terminals Flyovers Malls &
Multiplexes
Nuclear Bridges

Geothermal

Cement, Irrigation, Telecom are also some major sectors Come under the head of
Infrastructure.
 Segmentation of Real Estate Sector

Commercial Office • Business activity shifting from central business district to

special business district and from tier 1 cities to tier 2
space cities

• Broad categories include low cost, mid market and

Residential space premium hosing

• Contribution of organised retail to the retail industry

increased from 2 per cent in 2003 to 4 to 5 per cent in
Retail space 2007.
• International retailers are present through the franchisee
route

• Classification on the basis of star rating —one-star to

five-star deluxe.
Hospitality space • Number of approved hotel roomshas been estimated at
110,000 (including approved projects), 30 per cent of
which are in the five-star segment.
 Competitive Landscape

32-35% of next 5-years cash flows shall

63% of DLF’s next 5-year cash flows have come from existing bookings itself for
to come from future launches, only 7% Sobha and Unitech
for IBREL
40
100%
90% 35
80% 30
70%
25
60%
50% 20
40% 15
30%
10
20%
10% 5
0% 0

Existing Booking Unsold out of Current development Future Launches % of next 5-year cash flow from existing bookings

Source:- DLF Data and Credit suiccess Estimates

 PEST Analysis of Real Estate Industry

• SEZ Act to Boost Infrastructure Development

Political • FDI Liberalization to Augment Industry Growth
• REITs and REMF’s Positively Affected Real Estate Business

• Growth in Construction Activity Stimulating GDP Growth

Economical • Rate Hikes Unlikely To Slow Down Growth

• Rising Urbanization to Boost Industrial Growth

Social • Green buildings in India

• Low Technology Adoption to Hinder Growth

Technological
 Regulations relevant for the Real Estate Sector

Regulatory authority

• 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.

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
Conditions for Investment Other Conditions
Development
Minimum capitalization of US$ 10
Minimum 10 hectares to be
mn. for wholly-owned subsidiaries Investor is not permitted to sell
developed for serviced housing
and US$ 5 million for joint undeveloped plots
plots.
ventures with Indian partners

For construction-development Project to conform to norms and

Infusion of funds within 6 months
projects, minimum built-up area standards laid down by respective
of commencement of business
of 50,000 sq. mt. Prescribed state authorities.

Investor responsible for obtaining

Original investment cannot be
In case of a combination project, all necessary approvals as
repatriated before a period of 3
any one of the above two prescribed under applicable
years from completion of
conditions should be met. rules/bye-Iaws/regulations of the
minimum capitalization.
state.

At least 50 per cent of the project

Investor may be permitted to exit Designated authority to monitor
to be developed within five years
earlier with prior government compliance of above conditions by
from the date of statutory
approval. developer.
clearances.
 Union Budget 2010—impact on Real Estate
Policy Impact Direct Tax Impact Indirect Tax Impact
1. Interest subvention on 1. Threshold slabs for individual 1. Service tax rate maintained at
housing loans —a scheme taxation broadened, which is 10.3%.
was introduced by the expected to result in more
Finance Minister in the Union disposable income in the 2. Relevant definition of taxable
Budget2009–2010, which hands of the consumers. service, provided in relation to
allowed an interest renting of immovable property, has
subvention of1 % on housing 2. Corporate tax rates remain been amended with retrospective
loans of up to US$ 20,833 unchanged. However, effect from June 2007 to clarify that
(INR 1 million), provided the surcharge in the case of a renting of immovable property
cost of house does not exceed domestic company having would constitute a taxable service.
US$ 41,666 (INR 2 million). income above INR 10 million
This scheme has now been reduced from 10% to 7.5%. 3. Service tax to be levied on lease of
extended up to 31 March, vacant land if the lesser undertakes
2011. 3. Minimum alternate tax (MAT) construction on such land for
hiked from 15% to 18%. furtherance of business or
2. Allocation for housing and commerce during the tenure of
urban poverty alleviation has 4. Turnover threshold limit for lease.
been raised from US$ 177 getting accounts audited
million (INR 8.5 billion) to US$ (under section 44AB) has been 4. Peak excise duty rate has been
208 million (INR 10 billion) for relaxed to US$ 12,500 (INR 6 increased from 8% to 10%.
2010–11. million) from the existing limit Accordingly, peak effective customs
of US$ 83,333 (INR 4 million). 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 Supply Push Factors

Robust and sustained macro-economic

Policy and regulatory reforms (100 per
growth.
cent FDI relaxation).
Upsurge in industrial and business activities,
especially new economy sectors. Positive outlook of global investors.

Favorable demographic parameters Fiscal incentives to developers.

Significant rise in consumerism.
Simplification of urban development
Rapid urbanization. guidelines.
Availability of a range of financing options at Infrastructure support and development
affordable interest rates. initiatives by the government.
GROWTH
DRIVERS
Impact Impact
Entry of a number of domestic and foreign
Increasing occupier base. players; increasing competition and
consumer affordability.
Easy access to project financing option
Significant rise in demand for
office/industrial space. Increases developers’ risk appetite and
allows large scale development.
Demand for newer avenues for
Improved quality of real estate assets
entertainment, leisure and shopping.
Development of new urban areas and
Creation of demand for new housing. effective utilization of prime land parcels
in large cities.
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.)
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.

Govt. is increasing Public Private Partnership in Infrastructure sector.

Till now the Govt./Private partnership is 7:3.
Challenges Faced by Indian Infrastructure Sector

• Targets not getting translated to steady pipeline of

Institutional projects because of limited institutional capacity
• Multiple Approvals
Capacity • Overlap of Jurisdiction

Availability of • Underdeveloped Debt Capital Markets

• Pension/Insurance Sector to be opened up
Capital • Shortfall in Equity Capital with local sponsors

Execution • Land acquisition issues

Challenge • Delayed permits & clearances

Dispute • Lengthy dispute resolution mechanism

Resolution
Source:- IDEF
 Outlook of Indian Infrastructure Sector

Projected need for Infrastructure

Spending 2010-19, US$, Bn. 35% CAGR is Expected for next 3 Year
160 10.00%
9%
150 94 140 8%
9.00%
143
8.00%
288 427 120 7%
7.00%
115
33 100 6.00%
154 6.30%
94
80 4.20% 4.50% 5.60% 5.00%
281 4% 4% 4% 4%
272 4.90% 4.00%
60 3.00%
58 3.00%
Ports Roads 40 46
39 2.00%
Railways Irrigation 20 27 28 32
1.00%
24
Water Supply Airport 0 0.00%

Power Internet and Telecom

Infrastructure spending Current Growth Rate

Expected Growth Rate
Infrastructure Investment 2010-2019 will be
1700 bn. US$ is expected.
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 Company Profile

a) Global Overview a) Company Overview
b) Indian Industry Overview b) Geographical Segmentation Chart
c) Segmentation of Infra sector c) Company History
d) Segmentation of Real estate Sector d) Company Milestone
e) Competitive Landscape e) Financial Highlights
f) PEST Analysis of the Sector f) Segmental Result Analysis
g) Regulatory Environment g) Peer Group Analysis
h) Growth Driver of the Industry h) Stock Chart Analysis of the Company
i) Challenges Faced by the Industry i) Board of Director/ Top Management/
j) Outlook of the Industry Shareholding Pattern
j) SWOT of DLF
k) Financial Modelling
l) Major news
 Company Description

 DLF Ltd. is India’s largest Real Estate

Company.
OFFICE
 DLF has a 62-year track record of
sustained growth, customer satisfaction,
LEISSURE and innovation.
HOTELS
& SEZ  Group has over 0.2 bn. sq. ft. of existing
development and 748 million sq. ft. of

DLF
planned projects.
 DLF Group was founded in 1946 and was
incorporated in the year 1963 as
American Universal Electric (India)
SHOPING Limited.
HOME
MALLS  The company has a pan-India presence
with operations in more than 30 cities.
INFRASTR- The company has 79 subsidiaries.(*2007)
UCTURE  Number of employees 2478 (*2007)
 Listing on BSE and NSE in the year 2007.

Source:- DLF annual report

Geographical Distribution Chart DLF has
“Pan India Coverage”

Source:- DLF Investor presentation

 Company Business Break-up

DLF

EXECUTION
CORE BUSINESS NEW BUSINESS INVESTMENTS
ENABLERS

HOME HOTELS LOR JV PRUDENTIAL JV

OFFICE INFRASTRUCTURE WSP JV FUNDS

SHOPPING
Source:- DLF annual report
Company History and Milestones
 Company History and Milestones (2006-09)
1.DLF and TIDCO
entered into an
agreement for
1.Focus on IT parks
development of IT
and next generation
SEZ
malls.
2.Commenced
2.Significant
operations of India's
progress in new
first Luxury Mall -
business- Hotels
Emporio Clinches
and Large township
3.Title Sponsorship
of IPL

2006 2007 2008 2009

Foundation stone
1.DLF enters into a laid for DLF-IL&FS
joint venture with Metro In Gurgaon -
Prudential Insurance India's first public
to undertake life rail transport system
insurance business in
to be built & run by
India
a private Company
2.listing on NSE and
BSE

Source:- DLF Investor

Presentation, Money control
 Financial Highlights

Total Sales EBITDA

1600000 3 1200000 300%

1400000 2.5 250%

1000000
1200000 200%
2
800000
1000000 150%
1.5
800000 600000 100%
1
600000 50%
400000
0.5 0%
400000
200000
0 -50%
200000
0 -100%
0 -0.5
FY 07 FY O8 FY 09 FY 10
FY 07 FY O8 FY 09 FY 10
EBITDA YOY
Total Sales YOY

• 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.

Source:- DLF annual report

 Financial Highlights

PAT Interest paid on Debt

120000 120%
900000 350%
800000 300% 100000 100%
700000 250%
80000 80%
600000 200%
500000 150% 60000 60%
400000 100%
40000 40%
300000 50%
200000 0% 20000 20%
100000 -50%
0 0%
0 -100%
FY 07 FY O8 FY 09 FY 10
FY 07 FY O8 FY 09 FY 10
Interest YOY
Profit After Tax YOY

• 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.

Source:- DLF annual report

 Segments of DLF

Overall Segments Real Estate

• Land (including development rights), plots and • Development Business

Constructed properties
• Homes
• Retail chain outlets
• Commercial Complexes
• Food court / restaurant business
• Annuity Business
• Hotel business
• Rental businesses of offices
• Power generation
• Retail
• Cable operations
• Infrastructure
• Cinemas operations
• SEZ
• Recreational facility
• Hotel
• Insurance business
• Leisure
• DLF-Pramerica Asset Managers Private Limited

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
Financial Total Revenue (in Growth (in • During the fiscal 2008-09, DLF
Year mn.) %) consolidated revenues of Rs. 10,431
Crores for FY09 down by 29% from Rs.
FY 07 26,374 43.7% 14,684 Crores for FY08
• The decline in revenue was primarily on
FY 08 144,375 447.4%
account of limited new sales and fresh
FY 09 100,354 (30.5%) leases as a result of lower demand
witnessed in the year

Development Potential Development Potential

By Business Unit by Geography wise
7% 8%
6% Home
13% Super
Office
Metros
16%
Metros
Retail Malls
56%
23% Tier I
Commercial
71% Complex
 DLF Land Under Acquisition Quarter wise (msf)
70
60
7.5 12.1 16.3 15.4 14.4
50
40 resident
38.8 38.3
31.6 33.4
30 16.2 25 Retail
20
commercial
10
0
F3 Q08 F4 Q08 F1 Q09 F2 Q09 F3 Q09 F4 Q09 F1 Q10 F2 Q10 F3 Q10 F4 Q10 F1 Q11
Source:- Morgan stanlay Report
Demand Pan India Basis
300 •In all the quarters after Q308
250 there is consistent growth in
200
square feet sales.
150
100
•Projected that Growth of sales in
50 residential , retail and commercial
0 property will remain further.
2008 2009 2010E 2011E 2012E Demand projections are shown in
Commercial Residential Retail Hospitality the chart
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. The
Company 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 power
Exit it`s long gestation project
Affordable housing for middle income group
Shifting from north to other regions of the country
company 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
Market Cap. (in Cr.) Market Share
DLF DB Realty
HDIL Indiabulls Real
Suntech Realty Anant Raj Ind DLF
Unitech
Ackruity city Godrej Property
Ananthraj
Sobha Developer Parsvnath
Paservanth

3% 3% 2% Godrej
4%
4%
4%

7%
54% •All the Real Estate and Construction
9% Companies are in heavy Debt situation and
they are continuously working to improve
10%
their Balance sheet.
•DLF is going through heavy Debt Situation
and Continuously Liquidating.
Source:- DLF Annual Report
 Peer Group Analysis

Market Cap P/E (TTM) P/BV (TTM) EV/EBIDTA ROE ROCE D/E

Company (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

HDIL 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
Source:- India Infoline
 Indexed Stock Chart (taking 1st sep. 2009 as 100)

180.00

160.00 Stock Split

140.00

120.00

100.00

80.00

60.00

40.00

20.00

0.00

Infra DLF Unitech CCCL S&P CNX NiFTY

 Annotations for DLF Ltd.
120 Despite off Buyback of FY10 results out:
DLF increased
Rs. 11 bn. Started on prices and interest revenue on sales is
18/10/09 Market still fall rates also gone up below than expected
100

80

60
News- Q2 result:
Interest PAT raised RBI
raises RBI increased Q1 FY11
rates by Q3 FY10:
40 CRR by repo rate result: Net
increase 22.45%. Net profit Speculative
75 basic and reverse Up move: profit rise by
due to And heavy down by
point to repo rate by talks on 104%, Co.
increase in purchase 32.84%
20 control 25 basic relaxation in announced
inflation in foreign
liquidity FDI norms dividend
funds

Infra DLF further clarification see notes

 Annotations for Infrastructure Index
120.00 Interest rate RBI increased CRR
increased due to by 75 basic point
increase in inflation In two installments
100.00

80.00 Govt.
released GDP RBI created
expected to NBFC to bring
increase by down lending
60.00 7.5%. Heavy rate for sectors
purchase in And raised
FDI recorded limit on Cap RBI hiked repo
40.00 RBI increased Core Infra rate and reverse
repo and sector grew repo rate by 25
RBI withdrew reverse repo by 5.5% basic point to
emergency rate by 25 (acc. to IIP) control inflation
20.00 liquidity basic point
support
granted at
0.00 Global crisis

Source: further clarification see notes

Infra DLF
 Share Holding Pattern

Share Holding Pattern

1,600,000,000 90
Institutional Holding
1,400,000,000 80 FI / Banks
Mutual 2%
70
1,200,000,000 Funds / UTI
60
2% Insurance
1,000,000,000
50 Companies
800,000,000 1%
40
600,000,000
30
400,000,000
20
FII
200,000,000 10
95%
0 0
Promoters Institutional Non-Institutional

Total No. of Shares

Total Shareholding as a % of total No. of Shares

Major Share of DLF is held by Promoters and institutional investors. In institutional

holding majority part 95% is held by Foreign Institutional investors.

Source: BSE India

 Top Management

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

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

 Profit and Loss Account
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 1,043,135.69 785,089.78
Expenditure
Net Material Cost 399,975.65 322,949.48 257,953.74
Rent 2,374.36 4,236.52 4,952.29
Rates 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 24,085.34
Total 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
 Balance Sheet
Financial Year 2008 2009 2010
SOURCES OF FUNDS
Equity Capital 34095.95 33943.74 33947.82
Preference Capital 94958.2 139598.2 591986.17
Reserves and Surplus 1,839,774.12 2,241,839.82 2417338.5
Net 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 1712881.72
Short Term Debt 281077.57 315937.15 454783.27
Total Debt 1,220,874.72 1,632,013.30 2,167,664.99
Deferred Tax Liability 3,589.10 25,149.11
External Funds 2484285.48 3327389.26 4,423,256.60
Total Liability 4,453,113.75 5,742,771.02 7,466,529.09
APPLICATION OF FUNDS
Fixed Assets:-
Gross Block 516255.9 848668.83 1788445.59
Less: Accumulated Depreciation 34349.11 57429.53 132645.83
Net Block 481906.79 791239.3 1,655,799.76
CWIP 518404.24 568820.11 1112881.95
Goodwill 209306.73 226508.5 126798.91
Total Fixed Assets 1209617.76 1586567.91 2895480.62
Investments 91020.21 140249.67 550519.96
Deferred tax (net) 4139.12
Current Assets:
Cash 214213.55 119561 92,823.22
Inventories 945440.08 1,092,824.24 1,248,059.10
Debtors 197799.67 216482.15 161,896.41
Loans and Advances 736864.02 971199.46 759,330.10
Other Current Assets 565690.86 762,173.69 468,467.44
Total Current Assets 2,660,008.18 3,162,240.54 2,730,576.27
Less: Current Liabilities 433228.5 414043.61 463696.91
Less: Provisions 295178.62 368395.91 414015.84
Total Current Liabilities 728407.12 782439.52 877712.75
Net 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
 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

Revenue under I GAAP the revenue was collected on POCM, but
under IFRS, the revenue is shown only after the
Recognition property is transferred to buyer. So this is likely to
impact the company negatively

• Under I GAAP the investment properties are classified

as fixed assets and the assets are depreciated over
Investment time but under IFRS no such classification is allowed.
The properties should be stated at fair value and any
Properties gain / loss should pass through income statement.
P & L can become highly volatile

• The change in revenue recognition method will impact

Taxation the revenue because net income will be negatively
impacted
Thank you