DLF Ltd.: India's Leading Real Estate Company in Trouble


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Case Details:

Case Code : BSTR382
Case Length : 27 Pages
Period : 2005-2010
Pub Date : 2010
Teaching Note : Not Available
Organization : DLF Limited
Industry : Real Estate
Countries : India

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"Who would have imagined a year back that one of the country's largest developers would teeter on the brink of insolvency? As the economy shifted into a higher gear and the markets burst to meteoric highs, realty firms were among the most buoyant. But that's distant history."1

- Outlook Profit, June 12, 2009.

In Real Trouble?

As on June 12, 2010, DLF Limited (DLF), India's largest real estate company, had accumulated an outstanding debt of more than US$31002 million, marginally below the record high of US$3635 million in the month of March 2009. The net profit of the company also plunged by more than 60%, falling from US$993.25 million in financial year 2008-2009 to US$384.44 million in financial year 2009-2010. In addition to decreasing profits, DLF was struggling with an enormous outstanding debt and a high debt to equity ratio which stood at around 0.70 in the month of June 2010.3 To reduce its debt burden, DLF was considering selling 97% of its stake in Aman Resorts4, a hotel chain it had acquired in November 2007 for about US$400 million5, to Khazanah.6

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1] Mohammed Ekramul Haque, "Down the Debt Hole," Outlook Profit, June 12, 2009.
2] US$1 = 45 Indian Rupees (Rs.) approximately, as on September 25, 2010.
3] "DLF to Raise Rs 2,700 Cr to Reduce Debt," http://sify.com, May 16, 2010.
4] Aman Resorts is a chain of 23 hotels present in 15 countries as of June 2010. Its Indian assets included three resorts - one in Delhi and two in Rajasthan.
5] Irfan Khan, "DLF to Sell Aman Resorts, Appoints Goldman to Seek Buyers," http://dealcurry.com, April 5, 2010.
6] Khazanah is a Malaysian sovereign wealth fund. It was incorporated under the Companies' Act of 1965 in September 1993 as a public limited company and is owned by the ministry of finance, Malaysia. It has a stake in more than 50 companies with assets totaling in excess of US$ 25 billion.

 

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