Forced to offer price discounts at a time when customer demand remains
weak, realty major DLF has posted a weak set of numbers for the March
2009 quarter with revenues down by 18 per cent sequentially to Rs
11,22 crore.

The sharp drop in volumes —-34 per cent sequentially and 93 per cent y-
o-y indicates that prospective home buyers are still biding their
time; moreover some sales were cancelled.

Analysts point out that the poor demand together with the absence of
profits from DLF Assets Ltd(DAL)—-a firm floated by the promoters—has
resulted in the operating profit margin falling to 13.8 per cent from
56.5 per cent in the December 2008 quarter. That drove down the
earnings which fell 75 per cent sequentially to Rs 170 crore.

While the net debt increased by about Rs 300 crore to just over Rs
15,000 crore, the management has indicated that the company's debt
position will be reduced by half by the year end which is good news.

The company proposes to sell some of its assets to free up cash.
Nevertheless analysts believe cash flow pressures will continue—-DLF's
annual interest burden is high and receivables from DAL, although
lower than in the previous quarter, are around Rs 4,900 crore.

While earlier inflows from DAL had helped boost DLF's profits, the
company is no longer seeing any profits from this stream.

However, analysts believe that with some project launches being
successful, and the company conserving cash by putting on hold some
projects, the company should be in better shape.

CLSA estimates revenues in the current year in the region of Rs 3,400
crore and net profits at around Rs 1140 crore. The stock is trading at
Rs 245 but brokerages have a target price of between Rs 178 and Rs
200.