Financial Management & Corporate Finance Case Study

DLF Ltd.: Working Capital Analysis

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Abstract:
This case study deals with Working Capital management and operating efficiency of the real estate giant Delhi, Lease and Finance Ltd. (DLF). DLF, the largest real estate development company in India has the highest market capitalisation due to its strong financial performance over the years. The real estate industry in India has been growing tremendously and is second to agriculture in terms of employment generation and contributing heavily to the growth of the economy. Real estate is in its initial growth stage and is in the process of becoming organised. Although every industry/firm is influenced by changes in its external environment, however, the real estate is more vulnerable to changes. The economic downturn in 2008, has affected the profitability of most of the real estate companies. DLF, though affected by the downturn, was efficient enough to manage its working capital without much strain on its balance sheet. The case study analyses how DLF managed its working capital in the crisis situation and assesses its operating efficiency.

Pedagogical Objectives:

• To understand the concept of working capital management and analyse the operating cycle of a company
• To analyse the working capital management of DLF, prepare its operating cycle and cash conversion cycle and to assess DLF’s operating cycle performance.

Keywords : Working Capital Management, Indian Real Estate Sector, Operating Cycle, Cash conversion Cycle, DLF City, Mid-Income Housing, Special Economic Zone, SEZ, Receivables, Payables, Land Development Potential, Economic Downturn, Liquidity, Residential Township, Market Capitalization