| DLF Limited | ||||||
| Rating outlook revised to 'Positive'; Ratings Reaffirmed | ||||||
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| Note: None of the Directors on Crisil Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale Crisil Ratings has revised its outlook on the long-term bank facilities and non-convertible debentures of DLF Limited (DLF) to ‘Positive’ from ‘Stable’ while reaffirmed its rating at ‘Crisil AA’, and has reaffirmed its ‘Crisil A1+’ rating on the short-term facilities.
The outlook revision reflects the substantial increase in cash flow driven by strong sales booking backed by healthy demand momentum, new launches, DLF’s strong market position and execution track record. The financial risk profile is expected to remain healthy and will be aided by strong financial flexibility.
DLF is likely to record strong operating performance with significant increase in cash flows as DLF is expected to see 35-40% on-year growth in net sales booking this fiscal, with Rs 19,187 crore (including joint ventures [JVs]) registered in the first nine months of fiscal 2025 as against the sales booking of Rs 14,778 crore in full year of fiscal 2024. The strong performance is supported by a high net sales booking of Rs 11,816 crore in the third quarter of fiscal 2025 from the recently launched super luxury Dahlias project, where 40% of the overall launched area was sold within a quarter of launch. It was further supported by the phase II launch of Privana, which was sold within few days of launch, resulting in ~Rs 5,590 crore of sales. As a result, the collections are expected to remain robust and grow by 25-30% on-year in fiscal 2025, with collections of Rs 8,128 crore in the first nine months of fiscal 2025 compared with Rs 8,301 crore in full year 2024.
Healthy sales have led to significant quantum of committed receivables of Rs 29,146 crore as of December 2024. Furthermore, with upcoming launch pipeline of 23 million square feet (msf) (without JV projects) over the next 3-4 fiscals and sell down of its unsold inventory of Rs 24,895 crore, the company will have further upside to cash flow, which will support construction cost of projects over the medium term.
The financial risk profile is expected to remain strong over the medium term, driven by sustained focus on deleveraging and healthy operating performance. Although gross debt remained stable at Rs 4,435 crore in December 2024 as against Rs 4,536 crore in March 2024 and increased compared with Rs 3,067 crore as on March 31, 2023, due to a debt-funded land acquisition in fiscal 2024, the leverage metrics are expected to show continued improvement. Lease rental discounting (LRD) debt formed 10% of the overall debt of the company as on December 31, 2024. Gross debt (excluding LRD) to operating cash flow (excluding cash flows from annuity business) ratio is expected to marginally increase to 1.2 times in fiscal 2025 compared with 0.9 time in fiscal 2024, and will remain around 1 time over the medium term. Any deviation from the debt reduction trajectory and any material debt-funded acquisition will be monitorable.
In the development business under DLF, liquidity is supported by cash and bank balance of around Rs 8,968 crore as on December 31, 2023 (with RERA cash of Rs 7,106 crore) and committed receivables of Rs 29,146 crore against the pending construction outflow of ~Rs 20,000 crore as on December 31, 2024.
The cash flow of DLF would also continue to be supported by the dividend income received from DLF Cyber City Developers Ltd (DCCDL; rated ‘Crisil AA+/Stable’; JV of DLF with GIC; DLF has two-third stake in DCCDL), the rental arm of the group.
These strengths are partially offset by susceptibility to risks and cyclicality inherent in the real estate sector, with large contingent liabilities and pending litigation. |
Analytical Approach Crisil Ratings has combined the business and financial risk profiles of DLF and its subsidiaries and associates because of their strong operational and financial linkages.
Furthermore, Crisil Ratings continues to moderately consolidate DCCDL to the extent of economic incentive it draws. With the settlement of assets and inter-party payables between the two entities in fiscal 2020, the debt and cash flow of DCCDL remain ring-fenced. Both the entities have independent management, with no cross-guarantees or securities provided by either (except for a few specific assets, where the underlying land is with DLF); DLF and GIC have some affirmative rights for decisions taken at DCCDL. Crisil Ratings continues to factor in the dividend that DLF would receive from DCCDL on account of its shareholding in DCCDL.
Furthermore, DLF has fully consolidated the debt given to Pegeen Builders and Developers Pvt Ltd as DLF has given a corporate guarantee for the same.
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths:
DLF has an established track record in the domestic real estate sector across segments and regions. It is a well-recognised brand, with the most extensive track record among private developers. Its strong brand name has given it the ability to sell projects at an early stage of construction.
Additionally, the large, low-cost land bank, with a development potential of 192 msf spread across India, out of which about 61 msf is already identified for development in prime locations, underpins the company’s strong market position, supports profitability and lends a significant competitive advantage over other real estate developers.
Furthermore, gradual sales of the finished inventory will continue to support the cash flow over the medium term while the rental and hospitality portfolio will continue to contribute more than Rs 300 crore annually.
DLF also has certain projects under development in JV companies, debt for which is not consolidated, apart from where corporate guarantee has been given by DLF. While these projects are expected to be incrementally funded out of their own collections and sanctioned debt limits, limited support from DLF has been factored in the near term.
Weaknesses:
Additionally, DLF’s reliance on Gurgaon’s real estate market has been high and in case of any significant slowdown in demand or oversupply in the region, future revenue will be impacted. However, the company is slowly focusing on geographical diversification and has re-entered Mumbai market and also has planned launches across Goa, Gurgaon and Tricity. However, the extent of geographical diversification in the revenue profile will remain monitorable.
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Liquidity: Strong Liquidity is supported by cash and bank balance of around Rs 8,968 crore (majority of which is earmarked for project development in RERA accounts) and committed receivables of Rs 29,146 crore against the pending construction outflow of ~Rs 20,000 crore as on December 31, 2024. Utilisation of fund-based bank lines (sanctioned limit of Rs 3,232 crore) stood at 50% on average in the last nine months through December 2024 and stood at 67% on average for non-fund-based limits (sanctioned limit of Rs 1,482 crore) during the same time period. Financial flexibility is supported by track record of raising funds from national and international investors, banks and financial institutions and from a portfolio of leased assets and a large land bank. Cash accrual, cash and equivalents and unutilised bank lines should be sufficient to meet the debt obligation as well as incremental capital expenditure (capex) and working capital requirement. For the rental business under DCCDL, cash accrual is healthy, backed by a steady rental portfolio and amortised repayment structure of the debt. Crisil Ratings continues to factor in the annual dividend that DLF will receive from DCCDL to further cushion liquidity.
ESG profile The environment, social and governance (ESG) profile of DLF supports its strong credit risk profile.
The real estate sector has a significant impact on the environment as a result of high emissions, waste generation and impact on land and biodiversity. The impact on social factors is indicated by labour-intensive operations and safety issues on account of construction-related activities.
DLF has an ongoing focus on strengthening various aspects of its ESG profile.
Key ESG highlights:
There is a growing importance of ESG among investors and lenders. The company’s commitment to ESG principles will play a key role in enhancing stakeholder confidence given its high foreign portfolio investor shareholding and access to capital markets. |
Outlook: Positive Crisil Ratings expects DLF to generate healthy cash flow through new launches and liquidation of inventory while continuing to benefit from its strong market position. |
Rating sensitivity factors Upward factors
Downward factors
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About the Company DLF is one of the oldest and largest real estate companies in India, with more than seven decades of track record. DLF has developed more than 158 real estate projects and developed an area in excess of 340 msf. It has a diverse asset portfolio across the real estate segment and is further expanding its presence across the country. The company has experience in developing real estate projects across business and customer segments. |
Key Financial Indicators*
*Crisil Ratings adjusted numbers |
Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
# Yet to be issued |
Annexure – List of entities consolidated
As on December 31, 2024 |
| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||
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Criteria Details
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