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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In Real Trouble? Contd...

If completed, this deal was expected to release between US$300 million and US$350, helping DLF cut its heavy debt pile. The company was also implementing many other strategies with an eye on reducing its debt burden and managing its cash flow efficiently.

According to analysts, DLF had been doing well since liberalization and had witnessed strong growth as a private company in the growing Indian economy. It went public in July 2007 with one of the biggest IPOs (Initial Public Offering) in India. DLF raised capital of more than US$2 billion to further strengthen its growth. This made it the eighth most valuable company in India and its promoters, KP Singh and his family, the fourth richest Indians, just behind the two Ambani brothers7 and Lakshmi Mittal8.9

It was expected that after this IPO, DLF would be able to grow much faster and change growing Indian real estate sector, which was growing rapidly along with the Indian economy. The funds raised from the IPO enabled DLF to reduce its prevailing debt and acquire additional land to develop properties in the years to come. However, the global financial crisis10 in 2008 created a grim situation, and hampered the anticipated growth of DLF...

Excerpts >>

7] Mukesh Ambani and Anil Ambani, sons of Dhirajlal Hirachand Ambani, are one of the richest Indians, after getting ownership of various businesses of Reliance Group. Dhirajlal Hirachand Ambani created the Reliance Business Group, one of the biggest Indian conglomerates, which was divided among the two sons after his demise.
8] Lakshmi Mittal is Chairman and Chief Executive of ArcelorMittal, the biggest steel producing company in world. As of July 2010, Mittal had a personal wealth of more than US$28 billion.
9] "DLF IPO: The Indian Real Estates' Untold Story," The Economic Times, July 17, 2007.
10] The financial crisis started in 2007 and was triggered by a liquidity crunch in the United States' banking system. It led to the collapse of many large financial institutions, the bailout of banks by national governments, and a decline in stock markets around the world. It is considered by many economists to be the worst financial crisis since the Great Depression of the 1930s.

 

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