DLF Ltd Management Discussions.


The Indian economy continued to exhibit steady growth and remained among the fastest growing emerging economies, with a focus on the continued implementation of structural and financial sector reforms and efforts to reduce public debt. The Central Bank continuously eased the monetary policy following recent cuts in interest rates. However, full benefits are yet to be transmitted to the industry, which may lead to increased investments. Strong measures are being implemented to strengthen the countrys financial sector (especially banks) through the accelerated resolution of non-performing assets under a simplified bankruptcy framework.

The benefits of recent structural reforms like demonetization, GST and ongoing bank recapitalization would enhance economic stability. Global economic activity lost pace in FY19, reflecting a further slowdown in global trade and manufacturing activity. While economic activity in the US initially strengthened, factory activity and retail sales moderated. Economic activity in the Euro area remained weak due to muted industrial activity and subdued business confidence. Economic activity slowed in a number of emerging market economies as well, including in China. Crude oil prices remained volatile, reflecting an evolution in demand-supply conditions underpinned by OPECs production stance, rising shale output, weakening global demand and geo-political concerns. The strengthening of the US dollar led to weakening gold prices; however, gold prices picked up in May 2019 on escalating trade tensions, reviving its demand as a safe haven asset. Inflation remained below the target in several economies.

Turning to the domestic economy, GDP growth for 2018-19 has been estimated at 6.8%. Gross fixed capital formation growth has declined sharply to 3.6%, after having been previously in the double- digits. Private consumption growth moderated. However, the overall slowdown in growth was cushioned by a large increase in the governments final consumption expenditure.

Reserve Bank of India has estimated GDP growth for 2019-20 at 7% - in the range of 6.4-6.7% in the first half of the fiscal and 7.2-7.5% in the second half of the fiscal.


The Indian real estate sector witnessed a slew of structural transformations led by Real Estate (Regulation and Development) Act, 2016 (RERA), Demonetization and GST. In the near-term, these measures generated sectoral tailwinds, which are expected to increase transparency and confidence in the sector.

According to reports, Indias real estate sector is expected to grow to US$ 1 trillion by 2030, accounting for nearly 13% of the countrys GDP. The catalysts for this growth can be attributed to rapid urbanization, increasing emergence of nuclear families and rising household incomes. The countrys commercial realty segment, however, continues to enjoy increased capital flows. The sector also witnessed the advent of new niche markets comprising co-working spaces, warehousing, student housing and senior living.

The launch of Real Estate Investment Trusts (REITs) in India has helped institutionalize the commercial sector, empowering developers to mobilize patient long-term capital to catalyze growth across the coming decade. According to a JLL report, institutional investments during the 2014-2018 period doubled from US$ 9.4 billion to almost US$ 20.3 billion compared to the 2009-2013 period.

Residential Segment

During the last few years, government decisions like demonetization, GST, RERA and the Benami Transactions (Prohibition) Amendment strengthened the end user market, moderating speculation in physical markets. The Government remains committed to enhance the role of affordable housing, strengthening its Housing for All commitment. In the recent past, this industry segment was encouraged through infrastructure status, refinancing options and tax incentives. The year under review was marked by stability, right-sizing and right pricing of new products. Increased transparency and confidence due to recent measures strengthened the home buyers sentiment. According to reports, this segment grew 76% YOY in terms of units launched in calendar year 2018 and a modest 6% YOY growth in sales.

Market traction could have been better but was impacted by the recent turmoil in the NBFC sector, which caused some stress to cash starved developers. Whilst, the launches and sales there was limited upward movement in realizations and pricing.

Stronger traction was witnessed for completed projects owing to lower risk and non-applicability of GST on completed inventory, enhancing attractiveness.

Office Segment

The countrys Commercial realty segment reported strong growth. Capital inflows validated confidence in the countrys growth story. As per reports, Indias grade A office space offering stood at a substantial 49.26 million square meter (msm) [530 msf] and likely to surpass the previous benchmark of 65.06 msm (700 msf). Indias office space absorption is expected to rise gradually across the near-to-medium term owing to robust economic fundamentals and a positive investor sentiment.

The Commercial Office space is marked by evolving occupier trends, mostly driven by a rise in co-working demand. Co-working spaces no longer address only start-ups and SMEs, rather a substantial demand emanating from large mainstream corporates. The principal drivers of co-working spaces comprise savings in upfront operational costs and a flexibility in scaling or downsizing requirements. This trend is also helping developers in launching small office spaces and widening the tenant mix. Besides, quality standards in commercial offices are rising, marked by increased safety, sustainability and wellness as demanded by multinational tenants and space owners.

Retail Segment

Indias retail industry continues to get progressively organised, moving towards experiential retail where the key to success will be increasingly influenced by competent mall management and a healthy tenant mix.

As per recent JLL reports, the Grade A retail stock is expected to grow to nearly 9.57 msm (103 msf). Delhi-NCR leads commercial realty stock creation, accounting for approximately 32% of the total retail space in India.

A summary of the supply, absorption and vacancy rates is depicted below:

Besides, quality-driven malls have been consistently reporting superior occupancy levels and steady growth in trading densities. The changing landscape of the retail segment has prompted the adoption of consumer analytics to decode consumer preferences and enhance the shopping experience.


Real Estate (Regulation and Development) Act, 2016

The Central Government had notified the RERA in May 2016. However, certain States are yet to notify the rules or certain states notified the rules but were yet to launch an operational website by the close of the financial year under review. Even as the regulation induced short-term pain, it is likely to be beneficial for the sector by enhancing consumer confidence and sectoral transparency.

Goods and Services Tax

New norms stipulated a one-time option to continue with existing slabs (effective rate of 12% for regular and 8% for affordable housing) with input tax credit or switch to new slabs (5% for regular and 1% for affordable housing) without input tax credit for under-construction or ongoing realty projects.

New projects mandatorily have to be in 5% slab for regular segment and 1% slab for affordable segment without any input tax credit. New norms are applicable for residential properties only, while there has been no change for commercial properties.


Material Developments

The Company successfully completed its equity capital raise of र 3,172.82 crore through a Qualified Institutional Placement of 17.30 crore new shares. The Company will utilize net proceeds primarily for the prepayment/ repayment of a portion of the borrowings (including intercorporate payables) obtained by our Company and/ or our subsidiaries, joint ventures, partnership firms, associates and general corporate purposes as per business requirements. During 2017-18, the Company issued 37.97 crore 0.01% Unsecured Unlisted Compulsorily Convertible Debentures (CCDs) of र 217.25 each at par, convertible into an equal number of equity shares of र 2/- each of the Company, on a preferential basis to the Promoters/ Promoter Group entities. During the year, 24.97 crore CCDs held by Promoter/ Promoter Group entities were converted into equal number of equity shares at र 217.25 per share and the remaining 13 crore CCDs were pending for conversion on or before 28 June 2019.

During 2017-18, the Company also issued 13.81 crore Warrants of र 217.25 each exercisable into an equal number of equity shares of र 2/- each of the Company on a preferential basis to the Companys Promoters/ Promoter Group entities. The Warrants will be converted on or before 28 June 2019 upon the receipt of requests and balance money from the Promoter/ Promoter Group entities. DLF Home Developers Limited, a subsidiary of the Company, entered into a 67:33 joint venture with Hines, a privately owned, global real estate investment, development and management firm with USD 116.40 bn of assets under management. This joint venture shall develop a high-end commercial project on NH-8, for which land is owned by the joint venture. This follows DLFs previous successful joint venture with Hines for the existing commercial development called One Horizon Centre in DLF 5, Gurugram. One Horizon Centre is a marquee office building enjoying Leed Platinum rating.

A new revenue-recognition accounting standard ‘Revenue from Contracts with Customers (AS-115), became effective from 1 April 2018. The standard focuses on recognizing revenues when the obligations of the Company have essentially been completed, risks have been nearly eliminated for the organization and control over the property has deemed to be passed over to the buyer. The standard has to be applied on fully retrospective basis on properties where the control and risk has not passed on to the customer. As a result, revenues and profits recognized on open contracts as of 1 April 2018, had been reversed and impact taken on opening Reserves of 1 April 2018. The amount reversed, in the opening Balance Sheet, was र 5,383 crore (net of taxes).



The Company reported consolidated revenues of र 9,029 crore during the financial year under review. EBIDTA stood at र 2,805 crore and Total Comprehensive Income for the year stood at 1,316 crore. The earning per share EPS (Basic) for FY19 was र 7.38.

The cost of lands, plots, development rights, constructed properties and others were recorded at र 4,951 crore. Staff costs increased marginally to र 352 crore while Depreciation, Amortization and Impairment charges were at र 225 crore. Operating cash flow before interest and tax for the fiscal stood at 1,605 crore while operating cash flow stood at

390 crore.

The financials for the fiscal 2018-19 are not comparable with that of fiscal 2017-18 on account of the following: (a) Revenue was recognized during the year under review, as per Ind AS 115 ‘Revenue from Contracts with Customers, whereas in the previous year, revenue had been recognized based on the Percentage of Completion Method (PoCM);

(b) DLF Cyber City Developers Limited (DCCDL) Group was consolidated as a subsidiary until 25 December 2017 and as a joint venture in accordance with Ind AS 28 ‘Investment in Associated and Joint Ventures for the remaining part of FY 2017-18, whereas DCCDL Group was consolidated as joint venture for FY 2018-19; and (c) A one-time exceptional gain upon the fair valuation of DCCDL was recorded in 2017-18.

Balance Sheet

Your Companys net worth as on 31 March 2019 was र 33,577 crore. The decrease was mainly attributed to the new accounting standard, Ind AS 115, due to which the opening reserves were adjusted by an amount of र 5,383 crore (net of taxes).

With a large infusion of equity during the year, net debt of the Company was reduced to र 4,483 crore, resulting in a net debt equity ratio of 0.13. The net debt is set to decline further in fiscal 2019-20. There were certain outstandings towards DCCDL amounting to र 8,700 crore as of 31 March 2019. These are proposed to be settled in fiscal 2019-20 primarily by transfer of certain land and leased buildings to DCCDL. DLF holds completed inventory worth 11,650 crore (at market prices) in its books (at cost), which it proposes to sell in the most efficient manner over next 3-4 years. During this period, the Company shall look forward to creating additional inventory, which it can look forward to selling after substantial completion has been achieved. The key ratios arising out of the Companys performance comprised: Net debt-equity ratio: 0.13 EBITDA margin: 31% Net profit margin: 14.6%. The change as compared to previous financial year is primarily attributed to a one time exceptional gain recorded in the previous year. ROE: 3.91%

DLF Cyber City Developers Limited (DCCDL)

DCCDL reported consolidated revenues of र 5,088 crore compared to र 4,948 crore in the previous year. EBIDTA stood at र 2,664 crore and Net profit after tax, minority interest and prior period items was 1,399 crore. DCCDLs consolidated net worth as on 31 March 2019 was र 7,465 crore.

The credit rating of DCCDL was upgraded to AA (-) by ICRA.


The key elements of the groups strategy comprise the following:

Continue to develop and grow the Rental platform, primarily through DCCDL; aim to increase rentals with respect to certain expiring leases

The DCCDL platform is being operated as an independent platform. The portfolio is expected to generate substantial free cash flows which will be subsequently utilized for organic as well as inorganic growth. The embedded growth potential of the portfolio is significant and driven mainly by contractual escalation, mark-to-market of lease rentals, assets under construction or land resource for further development, transfer of DLF assets for the settlement of DCCDL payables, prospective growth and inorganic levers.

Attain a conservative capital structure with the aim of significantly reducing the net debt position for our development platform operated by DLF and its subsidiaries (excluding DCCDL group)

Net debt for the Company stood at र 4,483 crore as on 31 March 2019. The proceeds from the equity mobilization and infusion of monies from the Promoter/ Promoter Group will enable the Company to substantially deleverage its development business down to a zero net debt position by next fiscal.

Leverage recent regulatory changes to benefit our residential real estate development business in the long-term

The strategy of the Company to create finished inventory is relevant given the recent regulatory transformations comprising the introduction of RERA and GST. The finished inventory has helped enhance customer confidence about the ready availability stock without a corresponding waiting period while the non-applicability of GST on finished products can enhance the value proposition for buyers.

Continue to rationalize our land reserves; increase our presence in strategic locations

The Company is engaged in concentrating on and expanding operations in key geographic markets that we consider to be strategically important. The Company intends to continue rationalize portions of its land reserves that we do not consider having significant development potential. We intend to continue to do so in the near future. At the same time, we intend to continue to selectively replenish our land reserves in strategic locations and to the extent consistent with our strategic imperative of contiguity and so far as it is required to implement our strategy of achieving the appropriate product and price mix. In this regard, the Company acquired an additional land parcel in Gurugram adjacent to the existing DLF Cyber City project.

Land Reserves

The Company owns significant land reserves in strategic locations across India. DLF group has a development potential of 18.77 msm (202 msf). The above development potential excludes enhanced development potential on account of changes in government regulations. Besides this, DCCDL group has development potential of 1.77 msm (19 msf). The Company has the ability to take advantage of favourable market conditions by launching projects quickly, without having to acquire land.


1. As of 31 March 2019

2. Includes TOD potential in Delhi

3. The Development Potential is the best estimate as per the current zoning plans on lands owned by the Company/ group companies, or lands for which the Company has entered into arrangements with third parties including joint development/ joint venture agreements/ other arrangements for economic development of said lands owned by such third parties. Some of these arrangements include making residual payments of र 800 crore to the land owners before the development potential can be fully exploited. The above development potential, TOD potential, increase TOD potential is under computation based on application filed.

4. Excluded DLF5 and New Gurgaon TOD/ TDR potential.


Development Business

The Company continued to report healthy sales in the Development business by monetising its ready-to-occupy pan-India inventory across the premium and luxury segments. It generated net sales of र 2,435 crore and expects this momentum to sustain. The Company targets net sales of र 2,700 crore in 2019-20.

During the year under review, the Company completed the construction of all its remaining projects. The process of handing the completed projects over to customers is ongoing and some of the projects have witnessed good habitation. DLF has demonstrated its execution capabilities and met all its customer commitments. The Company is now gearing up towards next cycle of development and is planning to build out 1.58 msm (17 msf) of residential and commercial space in the near future. Our land reserves exist in strategic locations and we have the ability to take advantage of improving market conditions by launching projects quickly without having to acquire land.

In the Development business, the following projects are on the anvil: 0.18 msm (1.9 msf) of residential development at Midtown, Central Delhi. This project is in a joint venture with GIC Real Estate, Singapore; construction has commenced. 0.56 msm (6 msf) of residential development at Midtown, Central Delhi. This project is in a joint venture with GIC Real Estate, Singapore; project designing is currently underway following the receipt of all relevant approvals. To enhance clarity, the above two projects exist in two separate asset-specific joint ventures and are different from the commercial business joint venture, in which GIC Real Estate is also a partner.

0.23 msm (2.5 msf) of luxury residential development at DLF5, Gurugram. The project is being planned. 0.28 msm (3 msf) of high-end commercial office building, on a recently-acquired land parcel of 11.76 acres adjacent to Cybercity, Gurugram. We entered into a 67:33 JV with Hines, USA, to develop this building. The project is under design.

0.28 msm (3 msf) of office building at IT SEZ, Hyderabad. The project is being designed. Following project completion and leasing, the project would be sold to a DCCDL subsidiary under a co-developer agreement of 2006. 0.23 msm (2.5 msf) of commercial complex at New Gurugram. The project is being designed.

Annuity Business

The commercial leasing business of the Company continued to report attractive growth. Our annuity business was carried out primarily through DCCDL Group with 2.58 msm (27.8 msf) of completed assets and also carried out by DLF and its subsidiaries (excluding DCCDL group), with 0.46 msm (5 msf) of completed assets. Some DLF Group assets are intended to be transferred to DCCDL Group during 2019-20 in lieu of the settlement of liabilities towards DCCDL Group. Gross leasing during the year was 0.61 msm (6.56 msf), of which 0.52 msm (5.57 msf) was attributable to DCCDL Group. Rental values continued to grow across geographies. The Group re-leased 0.17 msm (1.8 msf) of property, following expiry of a nine-year cycle, resetting rentals to the prevailing market. The group has significant mark-to-market potential on existing commercial portfolio across geographies, with significant room for rent revisions.

Cyber Park, a 0.23 msm (2.5 msf) commercial office building adjacent to Cybercity, Gurugram, shall commence rentals from September 2019 and has already been pre-leased to marquee tenants to the extent of 90%. Another phase of IT SEZ, Chennai, is nearing completion and rent commencement shall start in fiscal 2019-20. DLFs strong portfolio of quality office and retail properties caters to more than 1,600 tenants, including a number of Fortune 500 companies. DLF remains committed to the highest safety and compliance standards. The Companys existing properties set global benchmarks when they were launched and will raise the bar across new properties. The following new annuity business projects are on the anvil: 0.28 msm (3 msf) of a commercial office building at DLF Downtown, Gurugram. This Phase I of 1.02 msm (11 msf) project, adjacent to Cybercity, Gurugram, will be developed as a steel structure. The project is being designed and is expected to be completed quicker than conventional office buildings. 0.37 msm (4 msf) of a commercial office building in Chennai. This would be the Phase I of a 0.65 msm (7 msf) project in Chennai, land for which shall be transferred to DCCDL. The project is being designed.

The Companys project execution status and development potential

The total area under construction was approximately 0.50 msm (5.5 msf) as on 31 March 2019.

Other Businesses


Your Company owns two hotel properties viz. The Lodhi, which is an iconic hotel property located in New Delhi managed by your Company, and Hilton Garden Inn, Saket, managed by Hilton.


The Company is focused on improving its free cash flows and enhance its return on equity. With largely completed inventory on its books, the cash outflow on account of construction costs shall be minimal. The residual receivables on sales already contracted shall be more than residual outflow on account of construction. Hence, the entire amount on unsold inventory shall be available as free cash flow. Any improvement in selling prices shall lead to enhanced cash flows. Outflows on interest are set to reduce to approximately

100 crore per quarter from Q3 FY20 onwards. There shall be limited outflow for direct tax on account of existing deferred tax assets and MAT credit. The Company is also targeting reduction in overheads to reduce cash outflows.

Human resources

Competent human resource represents the fulcrum of DLFs sustained success. This resource has empowered the Company to respond with speed and sensitivity to emerging economic priorities, strengthened the Companys best-in-class performance across multiple product lines. The HR teams focus is to continue building organizational capability and capacity, leverage and nurture key talent, encourage meritocracy and enhance people utilization aligned with the business strategy. As on 31 March 2019, the Company, including subsidiaries has 1,608 (other than hotel business) employees.

Diversity and inclusion

The Company leverages diversity of knowledge, qualification, skill, professional experience, culture, geography and sectoral understanding to enhance its competitiveness. In line with this, the Companys hiring during the year under review focused on refreshing and enriching talent pools.

The Company believes in creating an inclusive environment. where diverse perspectives can enrich strategic perspectives. To enhance inclusiveness at work, our ‘gender sensitivity workshops sensitize the environment in strengthening our conduct towards women colleagues.

Rewards and recognition

We are a high-performing company catalyzed by variable compensation. The Companys Reward and Recognition Program (team and individual; monetary and non-monetary) enhances employee motivation and engagement at one level and promote a culture of excellence at the other.

Learning & Development

A constantly evolving business warrants a concurrent people growth. Our comprehensive training and coaching programs blends on-the-job learning, knowledge sharing and classroom orientation. Our in-house programs provided more than 4,000 person-hours of employee training across a range of programs, comprising Customer Relationship Management, Business Communication, Conflict Resolution, Self-Awareness & Positive Attitude, Working in Teams etc. To build a pool of exceptional talent and develop a leadership pipeline, high-potential employees were sponsored for functional and general management programs at world-class management colleges like Harvard Business School. In addition to this, the Company launched a mobile learning app (‘My Learning App) empowering employees chart their own learning journey through audio-visual tools, assessments and games. The app covers a variety of topics like Personal Development, Leadership & Managerial skills, Negotiation & Interpersonal skills etc.

Work-life balance & wellness

Our holistic wellness programme sensitised employees around work-life balance and importance of a healthy lifestyle, emotional, physical well-being and prevention of diseases. Annual medical checks, structured monthly health programmes, health bulletins, health talks and awareness campaigns were periodically conducted. The Company instituted attractive comprehensive group Mediclaim & Accident Insurance policies including emergency response facilitation, alliances with hospitals and diagnostic centres as well as consultation facilities with an in-house doctor and counsellor. The Company encouraged flexi-timings and annual leaves to promote a work-life balance.

Employee engagement

The Companys employee engagement efforts were aimed at encouraging teamwork and fun. The Companys employee cricket tournament (DLF EPL), enhanced bonding; the Company sustained its celebration of festivals and birthdays, team outbound/ offsites and Family Days to enhance employee motivation.

The Companys in-house HR newsletter (Sampark) and internal helplines, bulletins and focused team connect sessions deepened employee engagement and responsiveness.

Information technology

The Company moved its ERP infrastructure to robust Microsoft Azure cloud. As per the policy, it is configured as ‘private cloud, retaining the application accessibility through DLFs VPN. Cloud infrastructure is cost-effective and flexible enough to ramp infrastructure up/ down as per transaction processing needs. In addition to this shift, the Company moved to another cloud platform, namely Office365 (O365), increasing email accessibility outside the DLF network through controlled access. The Company automated its pre-sales and customer query management processes by implementing globally acclaimed standard applications to strengthen the sales cycle, support digital transformation and provide an enriched customer experience. As a part of a continuous evaluation of IT infrastructure robustness and security policy implementations, the Company is passing through an independent information security review following which recommendations (as applicable in our environment) would be implemented. The Company ensures all IT compliances and IT controls are implemented and adhered to as per ITGC audit and other statutory requirements. The Company established proper governance and review models with IT support partners to ensure a proper monitoring and improvements, wherever required.


Your Company is exposed to a number of risks such as economic, regulatory, taxation and environmental risks as well as sectoral investment outlook. Some risks that may arise in the normal course of business that could impact its ability to address future developments comprise credit risk, liquidity risk, counterparty risk, regulatory risk, commodity inflation risk and market risk. Your Companys strategy of focusing on key products and geographical segments is exposed to economic and market conditions. Your Company implemented robust risk management policies that set out the tolerance for risk and your Companys general risk management philosophy. Your Company established a framework and process to monitor exposures to implement appropriate measures in a timely and effective manner.

Cautionary Statement

The above Management Discussion and Analysis contains certain forward-looking statements within the meaning of applicable security laws and regulations. These pertain to the Companys future business prospects and business profitability, which are subject to a number of risks and uncertainties and the actual results could materially differ from those in such forward looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties, regarding fluctuations in earnings, our ability to manage growth, competition, economic growth in India, ability to attract and retain highly skilled professionals, time and cost over runs on contracts, government policies and actions with respect to investments, fiscal deficits, regulation, etc. In accordance with the Regulations on Corporate Governance approved by the Securities and Exchange Board of India, shareholders and readers are cautioned that in the case of data and information external to the Company, no representation is made on its accuracy or comprehensiveness though the same are based on sources thought to be reliable. The Company does not undertake to make any announcement in case any of these forward looking statements become materially incorrect in future or update any forward looking statements made from time to time on behalf of the Company.