DLF said that the credit rating agency ICRA has reaffirmed its rating and revised outlook to 'positive' from 'stable' on the instruments and bank facilities of the company.
The agency has reaffirmed the rating of non-convertible debentures, fund-based-term loans, fund-based-working capital facilities and non-fund based-working capital facilities/bank guarantee of the company at "[ICRA] AA-" while revising the outlook on the same to 'positive'.
It has reaffirmed the rating of DLF's commercial paper at "[ICRA] A1+".
ICRA said that the reaffirmation of the ratings reflects DLF's robust sales and collections in FY2022 and Q1 FY2023, which enabled significant reduction in the net debt. The company recorded net sales of Rs. 5,321 crore and collections from customers worth Rs. 4,529 crore in FY2022, registering a year-on-year (YoY) growth of 73% and 96%, respectively, and its net debt level reduced to Rs. 2,259 crore as of June 2022 from Rs. 4,885 crore as of March 2021.
The 'positive' outlook reflects ICRA's expectation that the planned launches in FY2023 in new geographies and diverse segments will further strengthen and diversify the company's cash flows.
The ratings derive comfort from DLF's strong market position and established brand, particularly in the National Capital Region (NCR) and its low cost and fully paid-up land bank, with well-located parcels across multiple cities and having diverse land usages, which provides strong visibility of launches with robust profitability. While reaffirming the ratings, ICRA has considered the heathy rebound in collections from DLF's hospitality segment and its leased out commercial properties2 on the back of the waning impact of the pandemic and the resultant comfortable leverage metrics of the loans outstanding against the same.
The company has a significant launch pipeline of 7.6 million square feet (msf) in FY2023 and 35 msf in the medium term, which exposes the Group to execution and marketing risks, though the new projects will offer diversification in terms of product ticket size and format.
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Further, high dependence on the NCR real estate market exposes the sales to any region-specific downturn in demand. While it plans to launch multiple projects in various cities outside NCR, the extent of scale up in these territories and their contribution to the consolidated sales mix will remain a key monitorable.
ICRA notes that DLF has significant contingent liabilities, primarily on account of matters pertaining to taxes and penalty imposed by the Competition Commission of India (CCI). ICRA will continue to monitor the developments pertaining to these contingent liabilities and take rating action as and when more clarity emerges on the same.
DLF is one of the largest domestic real estate developers with more than 70 years of track record in developing real estate. The company has developed more than 330 msf of area. It is credited for developing many well-known urban colonies in Delhi, including South Extension, Greater Kailash, Kailash Colony and Hauz Khas, as well as one of Asia's largest private townships, DLF City, in Gurgaon, Haryana.
The scrip added 0.98% to currently trade at Rs 371.70 on the BSE.
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