DLF struggled to expand its sales and net profits, yet again, in the March quarter.

Despite higher volume of space sold by the developer, its consolidated sales for the March 2012 quarter dipped marginally by 2.5 per cent to Rs 2,617 crore compared with over a year ago.

Net profits fell sharply by 38.6 per cent to Rs 212 crore.

With the latest ended year, DLF's net profits have declined steadily since FY-08. Profits for FY-12 are a third of the peak profit of Rs 7,821 crore seen in FY-12.

Operating profit improves

At the operating level though, DLF showed some signs of improvement in the March quarter.

Operating profits expanded by a good 26 per cent on account of lower land and construction cost.

A good proportion of plotted development sales, which do not require too much development costs, may have resulted in pulling the costs lower.

While there are no details on the volume of plotted sales, the company did sell developed plots in regions such as Lucknow, Alameda and Hyderabad.

But high interest costs once again dragged profits. Interest costs in the March quarter jumped over 30 per cent.

Operating profits covered interest cost by just 1.2 times from 1.5 times a year ago.

With long-term liabilities of Rs 19,100 crore in its balance sheet, DLF is likely to continue to face pressure on servicing it. Its leverage though remains at an acceptable 0.7 times.

Average price

The space sold by DLF and the average price realisations in certain regions provide some cues as to why it has not managed to expand revenue. For instance, the average realisation of 10 million sq. ft booked in FY-11 stood at Rs 6,500 a sq. ft.

In FY-12, 13.55 million sq. ft of projects were sold for Rs 3,895 a sq ft.

The steep decline is visible across regions — Gurgaon and New Gurgaon and super metros such as New Delhi and Kolkata.

That means sales were skewed towards projects with lower realisations such as plotted developments. DLF has been resorting to this plotted sales model for the last couple of years to tide over liquidity issues.

DLF's sales growth may continue to remain tepid, until its portfolio has a higher proportion of full fledged development projects in residential, commercial and retail.

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