DLF Reality Presentation Project Gurgaon
- 2. Disclaimer This presentation contains certain forward looking statements concerning DLF’s 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 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., interest and other fiscal cost generally prevailing in the economy. 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. 2
- 3. DLF Today 3 153 Real estate projects developed 7 decades Experience in real estate development 330 msf 1 Area developed 14 states Geographical presence 204 msf Development potential excluding TOD potential in Gurugram (DLF ex DCCDL) 21 cities Across the Country 113 msf 2 Deliveries since 2007 1,000+ Number of tenants 7 msf projects under construction 19 msf Development potential through land reserves (DCCDL Group) 1 DLF Share 2 Total includes JV Share
- 4. 155 2,394 506 FY07 FY18 DCCDL DLF Journey since IPO Area developed Leading real estate company with demonstrated execution capabilities and diversified product offerings 113 msf Cumulative area developed and delivered since IPO in 2007 4 Increase in average prices 28 msf Area developed and leased out 85 msf Area developed and sold ~77 msf Residential area developed ~8 msf Commercial area developed Income ~18x Increase in rental income Rental income (INR Crs) Promoter commitment Partnerships Infused INR 9,000 Crs equity in the business with commitment of another 2,250 Crs Partnering with GIC for DCCDL transaction - 33.3% stake valued at EV of INR 35,617 Crs Consol rental income Healthy increase in residential selling prices across developments
- 5. 5 • Stressed balance sheets for several developers The real estate sector has gone through certain challenges… • increase in average realization in NCR from FY14 to FY181 Recent Developments in the Residential Real Estate Sector • ~160 msf of stalled projects in NCR since 20071 1 Source: Industry reports; 2 includes Camellias, Crest, Horizon Centre, Regal Garden, Kings Court, Primus; from project launch till completion …but DLF has maintained its position, completed execution and delivered its commitment Stalled Projects 113 msf • deliveries by DLF since 2007 Credit Dislocation 9.0% • Stringent provisions due to RERA, GST and other structural reforms resulting in stress on operating cash flows Structural Reforms • Fully compliant Advantage • increase in average selling price across project lifecycle2 >30% • Reduction in consolidated net debt 26,800 7,224 Q2 FY18 Q3 FY19 • of inventory under construction1 ~80% Net Debt (INR Crs) Post de-consolidation of DCCDL
- 6. Strong Vision with Ability to Adjust to Changing Market Environment Generate value for shareholders and maintain leadership position in real-estate sector Continue growing and generating positive cash flows across segments Maintain a healthy balance sheet Strong promoter commitment and partnership with respected global institutions Follow best-in-class corporate governance practices 1 2 3 4 5 • Stable and recurring income stream from strong portfolio of high quality office and retail properties • Focus on maintaining cash flow positive earning stream in the residential business with strong focus on monetizing finished inventory • INR 9,000 Crs equity infused by promoters in the business with commitment of another 2,250 Crs • 33.3% stake valued at EV of INR 35,617 Crs with DLF holding the balance 66.7% • S.R. Batliboi (member of EY Group) as statutory auditor with KPMG and Grant Thornton as internal auditors 6 24,828 30,276 Q2 FY18 Q3 FY19 26,800 7,224 Q2 FY18 Q3 FY19 Net Debt (INR Crs) Shareholder equity (INR Crs) • Equity cushion added to substitute debt in a volatile interest rate environment Q3FY19 information post de-consolidation of DCCDL Safety and Compliance 6 • Awarded Sword of Honour by British Safety Council • LEED Platinum Certification by USGBC • DuPont appointed as safety partner in 2011
- 7. Overview of the Verticals 7 Sustainable capital structure with a high degree of visibility on cash flows and profitability 2 Huge Development Potential Development business Well poised to benefit from improving market conditions ✓INR 12,300 Crs of ready inventory ✓~204 msf of strategic land reserves ✓~65 msf of additional TOD potential Rental business 1 1 One of the largest rental platform in India ✓32.8 msf of operational assets and 3.2 msf of under construction assets ✓~19 msf of development potential ✓Embedded income growth through contractual escalation and rental resets ✓1,000+ tenants including many Fortune 500 companies 1 Includes rental assets of DCCDL and DLF group.
- 8. Multiple Growth Drivers for DCCDL Group Growth Contributors Growth 8 Contractual Escalation Mark-to- market of lease rentals Assets under construction and development potential Future growth and inorganic levers ~15% average rent escalation every 3 years built into existing signed leases Embedded upside from mark-to- market rental resets for expiring leases Near term development at established locations Development opportunity given FAR upside and predominantly freehold land Ability to grow on sustainable basis given strong free cash flows 1 2 3 5 Platform Growth Drivers Transfer of DLF assets for settlement of DCCDL payables Transfer of additional assets from DLF like rent yielding assets, commercial land parcels, transfer of equity stake in JV, SEZ entity / DAL arrangements and other assets 4 27.8 2.5 0.7 11.5 7.7 Operational Portfolio Cyber Park Substantial development potential Development Potential in DLF Cyber-City Adjacent to well established Cyber City locations Chennai IT SEZ (Phase III) Mall of India Gurugram Under- construction within existing project Assets to be acquired from DLF
- 9. Significant Mark to Market Potential on Existing Commercial Portfolio Re-leasing at market rent to drive significant value creation 9 Mark-to-market Potential: Significant Room for Rent Revisions for Expiring Leases 96 62 48 120 73 58 Cyber City Chennai Hyderabad Average Portfolio Rent vs Market Rent for select projects INR/sfpm Current Avg. Rent Market Rent Current Avg. Rent Market Rent Current Avg. Rent Market Rent 1 Market rent means weighted average rate for new leases entered in Dec ‘18 for DCCDL Assets. 1 1 1 3
- 10. Overview of DLF’s Rental Assets (excluding DCCDL) Commercial assets Retail assets Project Leasable area (msf) Occupancy (%) In-place Rental1 (INR psf) Kolkata II 1.0 71.4% 34 Amex Tower 0.5 100.0% 49 DLF Centre 0.2 91.0% 360 Gateway 0.1 90.8% 113 Horizon One 2 0.4 96.0% 140 2.2 Project Leasable area (msf) Occupancy (%) In-place Rental1 (INR psf) Mall of India Noida 2.0 99.7% 94 Saket 0.5 92.9% 115 Chanakya 0.2 92.7% 158 Capitol Point 0.1 96.4% 365 South Square 0.1 99.4% 116 2.8 Mall of India, Noida The Chanakya 10 DLF Saket Note: 1 as of December 2018 2 DLF Share Certain rental properties and land parcels of DLF are intended to be transferred to DCCDL to settle inter-company payables 10
- 11. Strengthening Balance Sheet and Cash Flows Outstanding receivables net of construction liabilities Value of complete / near-complete inventory Quarterly interest cost Quarterly ongoing rentals Quarterly overheads Tax outflow 1 Receivables INR 3,000 Crs INR 12,300 Crs INR 60 Crs INR 150 Crs 2 Construction cost INR 2,350 Crs Net of assets to be transferred to DCCDL Cash outflows for overheads targeted to reduce in the medium term • Limited tax outflow on account of existing deferred tax assets / MAT credit • Remaining MAT credits available – INR 4,650 Crs 3 4 5 6 • Payable to DCCDL • To be settled by Sep’ 19; Majority by Jun’ 19 INR 250 Crs • Other interest • To reduce significantly post proposed QIP and promoter equity infusion INR 250 Crs 11 Note: All numbers have been approximated for ease of representation
- 12. Multiple Growth Drivers for Development Business Platform Growth Drivers 12 Completed / near-complete inventory INR 12,300 Crs of complete / near complete inventory ready to be monetized 1 Announced projects Focus on execution of announced projects in established locations 2 Strategic land reserves Land reserves in strategic locations like DLF Phase V with development potential of ~50 msf Strong development potential including FAR upside 4 Growth Contributors Growth Development projects under planning • Additional projects under development 3 Project Area (msf) Mid-town, New Delhi ~8.0 HSIIDC (67% share) ~2.6 Commercial tower, New Gurugram ~2.5 Hyderabad SEZ (33% share) ~3.5 Project Area (msf) New development in Cyber-City ~5.0 Chennai Office Block ~3.5 Retail development ~2.5 Projects being developed for Rental business ~16.6 msf of projects under development with DLF’s share of value c. INR 15,000 Crs ~12,300 Crs of inventory
- 13. Monetizing Strategic Land Bank Across India 13 Chandigarh Tri-City – 16 Gurugram – 108 DLF5 17 New Gurugram 78 Rest of Gurugram 12 Hyderabad - 8 Chennai - 18 Delhi Metropolitan Region - 16 Chandigarh Tri-City Delhi Metropolitan Region Gurugram Chennai Hyderabad Large land reserves in strategic locations across India 204 msf (approx.) of total development potential1 204 msf1 of development potential 64.7 msf of additional TOD potential in Gurugram Significant Land Reserves for Future Growth – DLF (ex DCCDL) Note: 1 As of December 31, 2018 • Does not include TOD potential of Gurugram • 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. Sum of these arrangements include making residual payments of approx. Rs 1,000 crs to the land owners before the development potential can be fully exploited Ability to take advantage of favorable market conditions by launching projects quickly without having to acquire land Rationalize land reserves in areas with limited potential and selectively replenish reserves in strategic locations Kolkata - 2 (msf) Other Indian Cities - 36 Bhubneshwar Gandhinagar Goa Mumbai Pune Nagpur Indore Kochi Jalandhar Ludhiana Kasauli Panipat Sonipat Shimla Other Indian cities 13
- 14. Select Land Reserves with Significant Asset Value Strategic location and connectivity to DLF Golf Course provides attractive development potential Phase V Chanakya Puri New Gurugram Tulsiwadi (Mumbai) Development potential (msf) (excluding TOD) ~17 Commentary ~2 msf / ~20 acres ~78 ~0.91 Diplomatic enclave in New Delhi Integrated township which include Group Housing, Commercial, Plotted and IT SEZ Premium location next to iconic Mahalaxmi Race Course 1 4 2 3 1 DLF share only 14
- 15. • Statutory audit by SR Batliboi (member of EY group) and internal audit by KPMG and GT • Mandatory pre audit for all payment transactions beyond a threshold • Regular system of budget review and updates • Revenue recognition strictly after receipt of 100% payment and issuance of possession letter • Partnerships with marquee investors like GIC, Hines • Long term partnerships spanning across multiple years and projects • High quality representation on board of joint ventures • 17 Board members including 9 independent directors of eminence • Strong audit committee comprising completely of independent directors • Prominent independent directors in Boards of key subsidiaries Key Differentiators for DLF 15 1 Post deconsolidation of DCCDL pursuant to IND AS policy for Q3FY19 Strong Track Record of High Quality Execution Assurance Framework Management Team World Class Partnership Restructured Balance Sheet • 7 decades of experience in real estate development • Presence across 14 states/UTs and 21 cities across the country • 153 real estate projects developed • 330 msf of area developed • Highly reputed professionals with strong business acumen • Strong mix of experience across sectors and professional practice • Equity cushion added to substitute debt in a volatile interest rate environment 24,828 30,276 Q2 FY18 Q3 FY19 26,800 7,224 Q2 FY18 Q3 FY19 Net Debt (INR Crs)1 Shareholder equity (INR Crs)1 Best-in Class Governance Practices