DLF : EARNINGS CALL TRANSCRIPT Q1Q1Q1

"DLF Limited

Q1FY'24 Earnings Conference Call"

July 24, 2023

MANAGEMENT: MR. ASHOK TYAGI - CHIEF EXECUTIVE OFFICER AND WHOLE TIME DIRECTOR - DLF LIMITED

MR. VIVEK ANAND - GROUP CHIEF FINANCIAL OFFICER - DLF LIMITED MR. SRIRAM KHATTAR - MANAGING DIRECTOR, RENTAL BUSINESS MR. AAKASH OHRI - CHIEF BUSINESS OFFICER AND GROUP EXECUTIVE DIRECTOR

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	DLF Limited
	July 24, 2023
Moderator:	Ladies and gentlemen, good day, and welcome to DLF Limited Q1 FY '24 Earnings Conference
	Call. We have with us today on the call Mr. Ashok Tyagi, Whole-Time Director and CEO, DLF
	Limited, Mr. Vivek Anand, Group CFO, Mr. Sriram Khattar, MD, Rental Business, and Mr.
	Aakash Ohri, Chief Business Officer and Group Executive Director.
	At this moment all participants are in listen-only mode. A question-and-answer session will be
	conducted towards the end of the session. At that time, you may click on the raise hand icon
	from the toolbar or type your questions. Should you need assistance during the conference call,
	please signal an operator by pressing star, then zero on your touchtone phone. Please note that
	this conference is being recorded.
	I now hand the conference over to Mr. Vivek Anand. Thank you, and over to you, sir.
Vivek Anand:	Thank you, Aman. Good evening, and welcome to DLF Limited Quarter 1 Financial Year 24
	Earnings Webcast. First of all, I'd like to thank all of you for joining us today. We are happy to
	announce that our business continues to deliver sustained performance across all key parameters.
	We will start with the highlights of the business, financial highlights for quarter 1 financial year
	'24 DLF Limited consolidated results.
	The revenues stood at INR1,522 crores, gross margin at 52%, EBITDA at INR495 crores, net
	profit at INR528 crores, reflecting year-on-year growth of 12%. New sales booking for the
	quarter stood at INR2,040 crores, in line with our guidance. Our launch inventory across market
	continues to witness healthy traction from our customers. We remain optimistic about the
	demand for housing as the cycle continues to remain positive. We are gearing-up for bringing
	new product across the markets during the fiscal. We believe that macro tailwinds, along with
	the strong demand outlook augur well for our business.
	In line with our stated strategy of entering new markets, we have announced our arrangement
	with Trident Buildtech Private Limited to jointly develop a residential project in Mumbai. This
	is an SRA project, which is currently being developed by a subsidiary of Trident. We will be
	developing the first phase of the free sale area totalling approximately 9 lakh square feet of
	saleable area. This will be a pilot project to understand the market dynamics and apply these
	learnings to see how best we can plan our expansion strategy in this market.
	We continue to focus on strengthening our balance sheet and cash generation. Strong collections
	led to a further reduction in net debt during the quarter. Consequently, our net debt now stands
	reduced to the lowest ever at INR57 crores. With these low levels of debt, we have almost
	achieved our commitment of being net zero and hopefully should end the year with a surplus
	cash position.
	I'll now move to the financial highlights for quarter 1 financial year '24 DLF Cyber City
	Developers Limited consolidated results. Rental income grew to INR1,047 crores, year-on-year
	growth of 13%. Consolidated revenue of INR1,412 crores, reflecting a 12% year-on-year
	growth. EBITDA at INR1,088 crores, year-on-year growth of 13%. And net profit at INR391
	crores, reflecting year-on-year growth of 21%. The office portfolio maintained its stability, while
	the retail business continues to follow an upward growth trajectory. Quarter 1 financial year '24
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DLF Limited

July 24, 2023

consolidated revenue of DLF Cyber City Developers Limited stood at INR1,412 crores, reflecting year-on-year growth of 12%. Consolidated profit for the quarter stood at INR391 crores, year-on-year growth of 21%. We are experiencing strong demand for our new office developments. We have achieved pre-leasing of approximately 82% across our two new office complexes, DLF Downtown in Gurugram and DLF Chennai. We remain enthused about the growth prospect of our retail business and remain committed towards expanding our retail offerings in multiple markets.

Our rental business has been conferred as the world leader in LEED Zero Water. We hold over 45 LEED Zero Certifications by the US Green Building Council, the highest in the world for any real estate developer. The residential project developed by the company, The Crest, has been voted as the Project of the Year by US Green Building Council, which recognizes projects, developers and builders that have demonstrated leadership in the residential green building marketplace.

Green homes play a pivotal role in reducing our environment footprint, fostering a sustainable and responsible way of life. These awards are a testament of our leadership approach towards sustainability and adoption of green building practices. With a strong pipeline of new launches planned for this fiscal and a strong rental portfolio, we remain confident of delivering consistent and profitable growth across our businesses.

With this, I'll end here, and we can now open the floor for the Q&A session. Thank you.

Moderator:Thank you very much. We will now begin Question and Answers sessions. To ask a question please click on the raise hand button on the tool bar or the Q&A tab and click raise hand. The operator will announce your name when it is your turn to ask the questions. Please unmute your webcam and microphone while proceeding with your questions. You may also send the Question via text from the Q&A Tab. Participants connected on the audio may click * and 1 on your phone to ask a question. Ladies and gentlemen, we wait for a moment while the question queue assembles. The first question is from the line of Pritesh Sheth from Motilal Oswal. Please go ahead.

Pritesh Sheth:Thanks for taking my question. First is -- again, on Mumbai, you mentioned 0.9 million square feet of saleable area. What would be the GDV potential, your launch plans, your initial investment into that subsidiary? If you can just provide some details and whether that project itself has further expansion possibility? And if yes, then how much it would be? Yes, that would be my first question.

Ashok Tyagi:So, okay. So, coming to the Mumbai project, I mean, in fact, I'll use this opportunity to give slightly greater colour to the entire project. This is a part of a bigger slum rehab scheme. And we anticipate once the entire process is complete, the total saleable area, I mean, I know in Mumbai we use RERA carpet but for us saleable area should be in the range of between 3 million square feet to 3.5 million square feet in the -- under the LOI, which is currently under development.

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DLF Limited

July 24, 2023

Now learning from our experience in Mumbai so far, the first phase that has been launched, what we are doing is that basis the slum rehab that has been completed so far, about a 900,000 square feet saleable area is what sort of consummated or very near consummation. So, we are transferring that cleanly into a new entity where we'll hold 51:49, and we'll launch this. The total project on which we are taking a 51% stake will be in the range of, as I mentioned, 3 million square feet to 3.5 million square feet. Plus, there are some adjoining expansion opportunities also that exist. But right now, that is the broad indication.

From an investment standpoint, we anticipate that the total equity, quasi equity or equity equivalents that we'll end-up investing in this project should be about INR400-odd crores. There may be some additional working capital advances, but I think the equity piece of it should be ballpark in the range of INR400 crores for the entire project in that sense, not just for this sliver of 900,000 square feet, which we have disclosed about. We will, at some stage, take equity in the parent company also, but there are some internal restructuring going around in that group, and we'll be able to sort of take an equity position only post those have been completed.

Pritesh Sheth:Sure, sure. That's helpful. And just to clarify again, so we had the SRA development right? Or...

Ashok Tyagi:No. We did not have the SRAs. The SRA was owned by an entity called Sahyog, which is a wholly-owned subsidiary of a North Indian developer called Trident. So, they had the SRA. We had no SRA. We have entered into this project because we did a lot of recce and we realized that this particular project, a) was offering almost 3 million square feet plus in the heart of Andheri; and b) I think the SRA progress was relatively better than what one normally sees in the early stage of SRAs in most other projects.

Pritesh Sheth:Sure, sure. All the best for that, and welcome back to Mumbai. My second question is on the increased vacancy that we have seen in the commercial portfolio largely on the SEZ side. So, any particular tenant, obviously -- I mean, whoever is left has any further space to be vacated and how do we see this trend going forward? And when do we expect that improvement to come? And I think non-SEZ has been doing well. We have shown that in our pre-leasing portfolio as well. But just your comments on SEZ portfolio.

Sriram Khattar: So, in Q1, there has been a large tenant of about 0.5 million square feet, which vacated in Cyber City, Chennai. And because of that, the vacancy has temporarily gone up, and it's a minor blip. I'm pleased to share with all of you that we have negotiated to lease that entire building of about 0.5 million square feet to a strong American company.

As we speak, whilst the negotiations and handshakes are over, the paperwork is going on to give it on lease. Their lease starts from October 1, and therefore, there is a temporary blip in the revenue earning, but it will pick-up very quickly.

Overall, the SEZ market has been a little weak. We have had the existing tenants take up space. Fortunately, for us, the vacancy has not increased because of that. And we are quite hopeful that the Ministry of Commerce and the Department of Revenue and the Ministry of Finance are in the final stages of issuing a gazette notification for floor-wise denotification for the IT-ITeS SEZ. Once that happens, I think the take-up will pick-up quite well.

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	DLF Limited
	July 24, 2023
Pritesh Sheth:	Sure, sure. And one last question to Vivek. We have now around INR3,000 crores of cash in our
	balance sheet, where we will generate another INR2,500 crores, INR3,000 crores this year --
	rest of the year, what are our allocation plan? Do we expect some -- should we expect some
	dividend payments this year, which should be higher than our usual payouts?
Vivek Anand:	So, hi Pritesh, I think my response will always be the same that yes, this extra cash, whatever
	we are generating, our first priority is to put it behind growth. So, we'll continue with that
	priority. And secondly, we'll continue to reward the shareholders as we've done this year.
Pritesh Sheth:	Sure. Any specific growth plans you want to highlight, or it would be like.
Vivek Anand:	So, it is like, for example, we talked about -- very recently, we talked about entering a new
	market. So, it is something which we are always exploring and evolving, right? So, there is
	nothing for me to specifically call out, but this is a continuous process, which we really go
	through. So as and when it happens, we'll be more than happy to share with you.
Ashok Tyagi:	Pritesh, like Mumbai, once an opportunity sort of gets curated enough for us to put a disclosure
	out, we will definitely put a disclosure out. But right now, I mean, some of those are just very
	early WIPs.
Moderator:	Thank you. So, the next question is a text question from the line of Vasudev Ganatra from
	Nuvama.
Vasudev Ganatra:	One, what are the exit rentals that we are expecting in FY '24 and FY '25? Two, how is our capex
	trajectory moving and our progress on leasing the vacant spaces in the rental's asset in DCCDL?
	Three, what is the presales guidance and launch trajectory for FY '24?
Sriram Khattar:	So, let me give you on the -- based on the March '24 quarter, the exit run rate will take the rentals
	up to about INR5,000 crores. And based on the exit rentals for March '25, this will go up further
	to about INR5,600 crores, INR5,700 crores. But these are just the rentals. To this, we have to
	add the maintenance and power income that we have, which will also grow to about INR225
	crores in FY '25 and INR275 crores in FY '26.
	On the vacancies, I have just explained on the SEZ side. On the non-SEZ side, I'm pleased to
	share that vacancies have been slowly coming down. And if we go as per plan, by the end of this
	year, we will have come down to a vacancy level, which should be roughly similar to what it
	was in the pre-COVID times.
Management:	Sales guidance, Aakash?
Ashok Tyagi:	So, the sales guidance, as we had mentioned last time also, continues in the range of 12 to 13.
	But given the fact that we are planning some major launches in the second half of the year, I
	mean, obviously, there is an upside risk to it. But from a guiding standpoint, I think we'll still
	stick to the 12 to 13 number that we had mentioned last time.
Moderator:	Thank you. The next question is from the line of Puneet Gulati from HSBC. Please go ahead.

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