Rating agency Crisil has revised its outlook on the long-term debt and bank facilities of the country’s largest real estate company, DLF Ltd, to ?stable? from ?negative? with a rating of ?A+?. The revision reflects Crisil?s expectation that the strain on the operating cash flows of DLF will reduce over the medium-term, as the real estate sector is on the path of recovery. The positive rating has come as a shot in the arm for DLF, whose chairman KP Singh has been awarded Padma Bhushan this year for his contribution to the real estate industry.
According to Crisil’s guidance, DLF’s operating cash flows are expected to increase over the medium-term. DLF’s sales in the second half of 2009-10 are expected to be better than the figures in the first half, although annual sales for the current year are expected to be lower than that in the previous year, Crisil has projected.
Singh had earlier said, “During the last few months, DLF converted short-term debt into long-term debt, mainly by securitising cash flows. To reduce debt, it has initiated a portfolio review wherein it is looking to exit the non-strategic businesses.” The move seems to have worked as is reflected in the upgrade in ratings.
On receiving the government honour, Singh said, “I consider it a tribute to all those who have supported us in the mission of building a new India. This is a recognition for the entire housing and construction industry”.
According to Crisil’s observation, DLF’s liability position remains favourable as about 78% of its debt as on November 1, 2009, was long-term. The company has debt payments of about Rs 2,400 crore over the next 15 months, against cash and bank balances of over Rs 1,100 crore as on September 30, 2009. The ratings continue to reflect DLF’s healthy business risk profile, conservative financial policy and significant financial flexibility. DLF’s business risk profile is marked by strong market position, low-cost land bank and economies of scale.