The net profit in the June quarter is down for all major listed real estate companies is a matter of worry for the sector in general. Though most of them have claimed their respective performances show they’re doing well, the fact is that analysts are aware that all is not well with the sector. The top managements have blamed the poor show on a challenging operational environment, citing high interest rates and elevated input cost.
The net profit of DLF Ltd dipped by 13 per cent, that of Unitech by 45 per cent, HDIL by 21.5 per cent, Parsvnath Developers by 19 per cent and DB Realty by 33.5 per cent.
Analysts believe construction costs had gone up by 30 to 40 per cent in the first quarter of 2011-12. This is mainly due to a sharp rise in costs of labour and raw materials. The increase in lending rates by the central bank has increased the borrowing costs of developers, they said.
Developers are likely to post even lower profits in the second quarter, on the back of slow sales growth and rising interest costs. The first quarter’s revenue trend was a mixed story. While DLF and HDIL showed an increase in year on year sales, the other major developers registered a dip. Parsvnath recorded sales worth Rs.217 crore versus Rs.257 crore in the corresponding quarter of last year. It maintains this is in line with its strategy of fast-tracking deliveries, rather than launching new projects.
There have been slippages in deliveries, too. Unitech could deliver just 0.2 million sq ft area by June 30 of the total deliverable area of 19.1 million sq ft for the projects launched after March 2009. DLF handed over just 1.9 million sq ft this quarter, while its target this year is 12 million sq ft.
As for expenditure, DB Realty has shown an increase by 45 per cent, while for DLF Ltd, it was up by 25 per cent. DLF’s interest charges went up 28 per cent in the first quarter of 2011-12 to Rs.496 crore, as compared to Rs.388 crore in the first quarter of 2010-11. Its cost of land and development rights went up 34 per cent in the June quarter to Rs.726 crore, as compared to Rs.541.5 crore in the first quarter of 2010-11.
Similarly, for Bangalore-based Puravankara, its material and contract costs have almost doubled to Rs.84 crore in the first quarter of 2011-12 from Rs.42.5 crore in the same quarter last year. Its other operating expenses have also doubled.
DLF is strategising to concentrate on plotted development, saying it would enable them to mitigate the current inflationary environment and accelerate cash flows.
As for net debt, DLF’s went up from Rs.21,424 crore on March 31 this year to Rs.21,524 crore by June 30. Unitech’s gross debt fell Rs.203.7 crore to Rs.5,647 crore. The company did not state its net debt. For Parsvnath, net debt was Rs.1,200 crore, which the company is targeting to reduce to below Rs.1,000 crore by the end of the financial year.
