DLF : EARNINGS CALL TRANSCRIPT Q1Q1Q1Q1

"DLF Limited's Q1 FY'23 Earnings Conference Call"

July 30, 2022

MANAGEMENT: MR. ASHOK KUMAR TYAGI - CHIEF EXECUTIVE OFFICER & WHOLE- TIME DIRECTOR, DLF LIMITED

MR. VIVEK ANAND - GROUP CHIEF FINANCIAL OFFICER, DLF LIMITED

MR. AAKASH OHRI - CHIEF BUSINESS OFFICER & GROUP EXECUTIVE DIRECTOR, DLF LIMITED

MR. SRIRAM KHATTAR - MANAGING DIRECTOR, RENTAL BUSINESS, DLF LIMITED

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	DLF Limited
	July 30, 2022
Moderator:	Ladies and gentlemen, good day and welcome to DLF Limited Q1 FY'23 Earnings Conference
	Call. We have with us today on the call, Mr. Ashok Tyagi, CEO and Whole-time Director; Mr.
	Vivek Anand, Group CFO; Mr. Aakash Ohri, Chief Business Officer, and Group Executive
	Director; Mr. Sriram Khattar, Managing Director, Rental business. As a reminder, all participant
	lines will be in the listen-only mode and there will be an opportunity for you to ask questions
	after the presentation concludes. Should you need assistance during the conference call, please
	signal an operator by pressing '*' then '0' on your touchtone phone. Please note that this
	conference is being recorded. I now hand the conference over to Mr. Vivek Anand. Thank you.
	And over to you, Mr. Anand.
Vivek Anand:	Thank you, and good morning to all of you and welcome to DLF Limited Q1 Financial Year '23
	Earnings Webcast. Thank you once again for joining us today. Hope you and your family are
	keeping well and safe.
	Our business continues to deliver consistent performance across all parameters. I will start with
	the financial highlights for Q1 Financial Year '23 which is for DLF Limited consolidated results.
	Consolidated revenue stood at Rs.1,516 crores, reflecting a year-on-year increase of 22%. Gross
	margins continue to operate in the 50%-plus range. Q1 margin stood at 53%. EBITDA stood at
	Rs.488 crores. There is a drop in this quarter as the business is in scaling up phase and investing
	for growth. The increase in staff cost is driven by organization scale up and other expenses driven
	by business scale up cost of marketing and brokerage. We follow a policy of fully charging off
	sales and construction overheads, for which the corresponding revenue will be recognized in
	future.
	Net profit at Rs.470 crores, reflecting year-on-year increase of 39%. This was largely driven by
	significant reduction in the finance cost, along with growth in the JV profits.
	Residential demand continues to exhibit sustained momentum. The high demand for luxury
	homes has been a key trend, that is expected to continue. Our residential business continues its
	steady performance and clocked new sales booking of Rs.2,040 crores, reflecting a year-on-year
	growth of 101%.
	The Camellias,, our super luxury offerings continue to remain the preferred destination across
	the super luxury segment and delivered a healthy sales booking of Rs.350 crores during the
	quarter.
	Our new product offerings continue to evince strong interest from the market and made a healthy
	contribution of Rs.1,532 crores during the quarter. The contribution of new products in the total
	sales was approximately 75%. While rising interest rates may pose some challenges, we expect
	the structural recovery in the residential segment to continue. We continue to bring newer
	offerings across multiple segments and geographies.

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DLF Limited

July 30, 2022

We continue to remain committed towards surplus cash generation from our operations, continues to be a focus area. We generated surplus cash of Rs.421 crores during the quarter, which led to further deleveraging and consequently, our net debt at the end of the quarter stood at Rs.2,259 crores, one of the lowest levels.

I will now move to the financial highlights for Q1 Financial Year '23 DLF Cyber City Developers Limited consolidated results. We witnessed steady performance across our office portfolio. Retail business continued its growth path and delivered a healthy growth. Rental income grew 20% year-on-year, driven by a strong growth in retail revenue. Consolidated revenue of Rs.1,260 crores as compared to Rs.1,041 crores last year, reflecting a 21% year-on- year growth. EBITDA at Rs.961 crores, year-on-year growth of 18% and net profit at Rs.323 crores, reflecting a year-on-year growth of 60%.

Occupiers attendance continues to exhibit steady improvement, indicating return to normalcy in the office segment. Our Chennai asset is witnessing approximately 80% attendance compared to pre-COVID levels and Cyber City Gurugram is seeing 50% attendance. We are witnessing month-on-month improvement in these trends. With sustained collections and steady improvement in occupancy, the Office segment is well poised for growth.

We continue to deploy capital for creating safe, sustainable, and quality workspaces. Development of our new destinations across multiple geographies remain on track.

Retail business continues to exhibit steady growth with improvement in consumption trends. Organized retail is expected to get further share with strong preference for quality assets at established locations. Given these tailwinds, we remain committed to grow our portfolio across multiple geographies and hope to double our retail presence in the next few years.

Our strong balance sheet, healthy cash flow generation, coupled with a diversified pipeline of quality offerings provide us a unique opportunity to leverage this upcycle. We remain committed and confident in delivering our business goals. Thank you very much. We now open the floor for Q&A.

Moderator:We will now begin the question-and-answer session. The first question is from the line of Saurabh Kumar from JP Morgan. Please go ahead.

Saurabh Kumar: Sir, I had a few questions. One is effectively on this gross margin. So, your gross margins at 50%-plus are the best in the industry, but when we compare you on EBITDA, the number is you are lower than the industry and I know that you have increased your staff and other expenses. But is there like a target level of margins you want to run at, I mean, should we expect a 35%, 38% ballpark EBITDA at DLF or how should we think about the EBITDA level? The second for Akash is so we have seen price increases in The Crest, feedback is that price has gone to 25,000 to 30,000 in the market. So is there any early feedback you have for your golf course extension project, because Gurgaon finally seems to be going up in prices, when do you expect

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	DLF Limited
	July 30, 2022
	to launch it and any indication on that, that plus Reis Magos? And the third is on this Rs.900
	crores of CAPEX in the parent business, the rental for this will be about what, 200-odd crores
	and which specific projects are these?
Vivek Anand:	I'll take the first question. Thank you, Saurabh for your question. So, let me take the question on
	the EBITDA. So, first of all, as I outline that we are in a business scaling up phase, and we are
	investing for growth, right. So as you know that there will always be a delta between the time
	you scale up and the time you actually recognize the revenue. Having said that, if you really look
	at current quarter margin, we are holding on to our margins at upwards of 50%, to be precise
	this quarter our margin delivery was 53%. We are also committed to really bringing in new
	products which will continue to enhance our margins. So I will just give you an example that the
	DLF City Floors what we really launched in the last 18-months, there is Rs.3,000 crores of City
	Floors what we've launched, they're all adding up to a margin of 55%-plus. Overall, the new
	product portfolio what we've added in the last 18 months are committed to really enhance our
	margins as we go forward. Yes, EBITDA last year if you really look at, our EBITDA margin
	was 35%, yes, there has been a slight drop, but I will say that you should not be really looking
	at our P&L on a quarter-on-quarter basis. I think directionally if you really look at, we are
	investing for growth. So yes, there is a time lag. But I think if you really look at long-term, I
	think the product offerings, what we are really bringing in, they are all margin-accretive, and
	with time when they start recognizing the revenue, you will see that the EBITDA levels will
	start inching upwards of 35%.
Ashok Tyagi:	So basically, sort of just to elaborate on what Vivek said, really a 35% is definitely on the
	horizon. I don't think that's a challenge. It's an issue that basically right now, because if you look
	at our absolute margin is Rs.750-odd crores which on the current run rate will be a number closer
	to 1,000 on a go-forward basis. So I think once this lag between the revenue and costs corrects,
	I think, as Vivek mentioned, I think a 35%-plus margin should definitely be doable yet again.
Aakash Ohri:	You mentioned about price points, you are right in where they are today. But that's also a
	function of lot of other things that go behind. So not every property there if you've noticed also
	in Gurgaon is today demanding that kind of a price point, but also there's a lot of work that goes
	behind it and therefore, we are committed to continue to make sure that post-sales, our service
	levels, and deliveries are at par with what we had committed. So that is also a function of making
	sure that the price points are stable and sustainable. So these are all second and third transactions
	in the market. So I'm glad you mentioned it. As far as launches are concerned, yes, we are
	working on as we had also presented earlier. So all the products that you mentioned are being
	worked on and yes, there is a visibility of launches this year and we're looking forward to it in
	Q3 and Q4. we are gearing up. Just to let you all know that, today, we are happy to mention that
	most of the international designers in the world today are aware of DLF, are aware of what
	products and the quality of products that we kind of churn out and are spending their time and
	pitching for our products and this is across the board I am talking about. So, we work with most
	of them, we are hiding a lot of them. So, that particular thing is also going on. And as far as Goa
	63 and other floors that Vivek also touched upon, so for us right now, how we are looking at
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	DLF Limited
	July 30, 2022
	quarter-on-quarter is obviously the residual stock of super luxury, which is now minimal, but
	we want to continue to make sure that those price points are where they are, and we sell them,
	we continue to focus on our floors, which is by now, I can also tell you that it's been accepted
	and there was a major gap in the unorganized market, I think, which we've gone and plucked.
	So, the DLF floors, they are not accepted but are traded and then of course there are also new
	launches that you mentioned and of course Goa as well. So, we are on.
Sriram Khattar:	Capex on the new products are split into two, one, which are in the books of the DCCDL
	platform, where we will continue to invest between 1,200 to 1,500 crores over the next three,
	four, five years. And this includes DLF Downtown, Gurgaon, DLF Downtown, Chennai, the
	Mall of India in Gurgaon, Vasant Kunj mall expansion, etc., In addition to that, there are a few
	projects both in offices and retail on the DLF platform, which include the IT Park in Noida, the
	new mall which in Goa, which we have now named as DLF Avenue Goa, the High Street
	Shopping Centers in Phase-V in Gurgaon and in the Midtown. This I think would entail an
	expenditure of about 400 to 500 crores a year.
Moderator:	The next question is from the line of Murtuza Arsiwalla from Kotak Securities. Please go ahead.
Murtuza Arsiwalla:	Hi, Aakash, a question for you. You've had a successful 18 months with the new product
	launches, etc., and in about a year and a half ago, you did carve out this 35 million square feet.
	Any chances I'm sure you must be working on it, but any communication you want to give on
	how you want to replenish that 35 million square feet given you've been one and a half year at
	it, replenish that launch pipeline, taking more from the land bank?
Aakash Ohri:	Thanks. Good question. So with regard to launches, and how we have kind of mobilized markets,
	I'm glad you mentioned those 18-months, because we've been talking like this, but if you see
	how we have gone into every market, and quietly, like I'll make a small point of Chennai, we
	were there about a decade back, we got in, we worked against all odds outside the company,
	north Indian, whatever national yet and DLF prevailed, we got the maximum press, we got the
	maximum traction and I can't thank enough our investors. So, what happened there was that we
	have land banks as you all know across the. country Today, hopefully we are demonstrating to
	you and to the organization is that every square inch of our land bank is monetizable as and when
	we bring them in and to the levels that we can actually deliver are the price points, if you see
	Chennai, we did above almost 40% over what the actual markets there are, you look at Panchkula
	and Tri-City. I still remember three years back; it was completely written off. Today, our price
	points are again setting benchmarks in the market for others to follow. There is demand. Two
	major product launches are slated there. So basically what I'm saying is one step at a time. What
	we are carefully and unconsciously doing is that wherever we go, looking at those markets,
	looking at responses, if you look at Indore and Lucknow, we completely cleaned it up, Kochi,
	we've just got this one, quite a lot to go, but we've got another land bank. So everywhere where
	we are seeing buoyancy, we are seeing the DLF pulls, and I can't single out even one geography
	and say that look, that's not accepting us. Every geography has wholeheartedly kind of gone and
	endorsed us. So I think you will see. But I just want to be cautious here. All I'm saying is that
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