NSE Symbol: DLF | BSE Code: 532868
DLF Ltd is involved in the business of colonization and real estate development. The company operations traverse all the aspects of real estate development-from the identification of land, to the acquisition, planning, execution, construction and marketing of projects. It is also involved in the power generation business, maintenance services, hospitality, recreational activities, life insurance etc. Its internal business covers the development and rental business. Development Business of the Company is entrusted with the sale of commercial spaces, residential spaces and commercial complexes. The company has an unusual business model with its entire revenue generating through rentals and development. Its exposure across different types of businesses, sectors and geography, moderates a downward trend in the market. The company has also delved into infrastructure, SEZ and hotel businesses to amplify their reach. The DLF business is organized on a Strategic Business Unit(SBU) basis. SBU caters to the three primary segments of the residential market - Super Luxury, Luxury and Mid-Income. The product offering comprises of a wide range of products including duplexes, condominiums, row houses and apartments of differing sizes.
DLF Limited: History and Trends
DLF Ltd was consolidated in the year 1963. Chaudhary Raghuvendra Singh founded the company. The company was responsible for developing some of the first residential colonies of Delhi such as Krishna Nagar in East Delhi, which completed in 1949. Adhering to the Delhi Development Act,1957, the state assumed the full authority of the real estate development activities in Delhi, which imposed restrictions on the private real estate colony development programs. Therefore, the company started acquiring low-cost lands on the outskirts of Delhi, that is now controlled by the Delhi Development Authority. Most of the land was particularly in the district of Gurgaon. This led to their first real estate development project, the DLF Qutab Enclave, which has now evolved into the DLF City. DLF City is scattered over 3,000 acres in Gurgaon and it is an integrated township, which includes commercial, residential and retail properties in the modern city infrastructure which has schools, hospitals, hotels and shopping malls. It also possesses the prestigious DLF Golf and Country Club with luxurious facilities. Through the period 1950-1964, the company developed 22 urban colonies in different cities. In 1985, the company started development of the 3,000-acre DLF City in Gurgaon.
In 1996, the company ventured into Group Housing Projects. In 1999, they staked into the Grade A office spaces in Gurgaon. In 2002, the company ventured into developing organized retail complexes.
In 2003, the company completed the building of the DLF Cybercity in Gurgaon. In 2004, they launched the premium residential complexes with an opulent milieu of Golf Links. In 2007, the company formed a joint venture with Prudential Financial Inc, USA for Life Insurance & AMC.
DLF Ltd also penetrated the Capital Markets, after that. In 2008, they commenced the developments of DLF Emporio, which is India's first luxury mall. In September 2008, the joint venture company, known as DLF Pramerica Life Insurance Company Ltd, started operations with the purpose to sell and market life insurance products in the country. In 2009, the company began Capital Greens, which was considered to be the largest private sector residential project in Delhi.However, the company exited its asset management joint venture in the same year. In 2009-10, the company confirmed the merging of three companies with the DLF Cyber City Developers Limited(DCCDL). The three companies which were merged with DCCDL were:
Caraf Builders & Constructions Private Limited (Caraf), DLF Info City Developers (Kolkata) Ltd and DLF Info City Developers (Chandigarh) Ltd.
In October 2009, DLF was awarded as the Best Global Developer Award, 2009 by Euromoney.
In 2009, DLF sold DT Cinemas and ventured into a long-term strategic alliance with PVR Limited.
In early 2010, Caraf (along with its subsidiaries) became a wholly-owned unit of Cyber City DLFs subsidiary, giving force to the integration process.
On 30 May 2016, DUL accomplished an Amendment Agreement with PVR Limited regarding the sale of cinema exhibition for an amount of Rs 433 crore. The Amendment Agreement suggests the exclusion of DT Savitri (1 screen) and DT Saket (6 screens) from the transaction. Consequently, the regulatory and other customary conditions precedent, DUL intended to sell 32 screens in the National Capital Region and Chandigarh to PVR. In June 2015, DUL entered into a series of comprehensive agreements to sell its cinema exhibition business which was operated under the brand name of DT Cinemas to PVR Limited, on a slump sale for an amount of 500 crores.
In 2010-11, DLF Ltd.'s subsidiary, DLF Home Developers Ltd, acquired an additional 50% interest of the Delanco Real Estate Pvt Ltd and a 50% interest in Design Plus Architecture Pvt Ltd. In May 2010, DLF launched the second phase of Garden City, DLF New Indore. In May 2011, after the remarkable response to the first phase of its project Garden City in Indore, DLF announced the launch of the second phase of the project.
In December 2011, DLF Ltd along with its joint venture partner Hubtown Ltd sold their entire shareholding in DLF Ackruti Info Park in Pune to an entity controlled by the real estate fund. Consequently, DLF Ackruti stooped being a subsidiary of the company with effect from December 2011. DLF launched an 8.3 km expressway project in Gurgaon in 2011 in partnership with the Haryana Urban Development Authority or HUDA. In the same year, DLF started the operation of the second multilevel parking facility at the Baba Kharak Singh Marg in New Delhi. In June 2012, DLF stated that the company's wholly owned subsidiary, DLF Hotel Holdings Ltd, has divested its complete shareholding in Adone Hotels and Hospitality Ltd (Adone) for a sum of 567 crores. The sale of the shareholding was initiated in line with DLF's clear objective of divesting the non-strategic assets. In August 2012, DLF announced that the company and its two subsidiaries had entered into an agreement with the Lodha Developers Ltd. for the sale of their stake in the Jawala Real Estate Private Ltd. for an estimated value of 2700 crores. This was an essential step in the company's strategy to divest their non-core assets and focusing solely on the core business. The transaction finished by the end of October 2012. In July 2013, DLF announced that it had signed an agreement to sell 74% of the equity stake of DLF Pramerica Life Insurance Company Ltd, the life insurance joint venture with Prudential International Insurance Holdings Ltd, a subsidiary of Prudential Financial Inc to Dewan Housing Finance Corporation Ltd (DLF)
In 2014, DLFs subsidiary Emporio Limited closed India's first Commercial Mortgage Backed Security (CMBS) issuance of 525 crores, with a coupon rate of 10.9% per annum and Legal Maturity of 7.5 years. DLF Emporio maintains part of a Luxury Mall in Delhi. In the same year, DLF became India's first development company to get the ISO certificate. In February 2014, DLF Global Hospitality Limited (DGHL) which is a step-down subsidiary of DLF, declared that it had sold the complete equity stake in Silverlink Resorts Ltd. (SRL) to Aman Resorts Group Ltd. (ARGL), which is a Joint Venture of Peak Hotels & Resorts Group Ltd. (PHRL) and Amanresorts, for an enterprise value of 358 million dollars. The sale was made in the form of a management buyout.
DLF Global Hospitality Ltd had acquired 100% equity in Amanresorts in 2007 from an investors group. The deal excluded the iconic Lodhi Hotel in Delhi which remained a part of DLF Ltd. In September 2015, DLF stated that its wholly-owned subsidiary DLF Home Developers Ltd. (DHDL) and GIC, which is Singapore’s sovereign wealth fund, had entered a joint venture to invest in the two upcoming projects located in Central Delhi. Both projects were developed under DHDL and GIC had invested about 1990 crores in this project. In 2016, DLF launched the DLF Mall of India which is the first destination mall of the country, in Noida NCR. The DLF Mall is spread across 2 million square feet.
In 2017, GIC Real Estate partnered with DLF Cyber City Developers Limited (DCCDL) following the conclusion of Compulsorily Convertible Preference Shares (CCPS) transaction earlier that year. Consequently, the promoters of DLF infused 9000 crores through subscription to Compulsorily Convertible Unsecured Debentures (CCDs) and the warrants of DLF Limited. DCCDL manages a rent-yielding portfolio of retail assets of approximately 27 million square feet, which has a significant potential for development. In the same year, DLF launched The Chanakya Mall, in Lutyens' Delhi. The Chanakya Mall is a destination where architecture synchronizes harmoniously with the largest brands in the world. The Chanakya gives a curated experience of Retail, Food and Cinema. It is a part of DLF's luxury possessions and showcases some of the leading extravagant national and international brands.
Should You Invest in DLF Limited?
Investors and analysts all over the world believe that DLF Limited is an interesting stock to invest in. As already discussed in the article DLF has a tendency of divesting it's non-strategic assets, to maintain a good financial health and it has a strong history of performance.
In 2018, it outperformed its past performance. Also, it's growth surpassed the Real estate industry Expansion. However, presently, the stocks of DLF are trading at one-tenth of its peak valuation. The BJP-led Haryana government has stated that there will be a probe on all the land scams, and one of the land scams involves DLF. DLF was also slapped with a penalty from SEBI for failing to disclose key information at the time of its record-breaking 2007 IPO.
Between the FY 201-2015, the rental income of DLF increased by three times but it's debt remained constant in this period. This shows that there is no immediate liquidity crisis for the company.
Betting on DLF Limited at this point could go either way. SEBI slapping a penalty on the company has raised many red flags and it can affect the financial health of the company. Analysts have also hinted on the unpredictability of the value of DLF stocks. As of now, it is better to avoid investing in the company.