DLF’s share prices have dropped drastically
The Indian property market went through a bull run in the last decade, with prices in most major cities sky-rocketing. However, fortunes of the country’s largest property developer DLF have been less than spectacular over this period.
The company’s share price, which crossed Rs 1,000 per share in early 2008, trades at around Rs 175 now. It is also saddled with a huge debt of Rs 19,000 crore. What could have caused this wide gap in performance between the country’s property market and that of its largest real estate developer? Since its blockbuster IPO in 2007 in which over Rs 9,000 crore was raised, DLF saw its debt balloon, revenues fall, profits shrink and cash-flows dry up. While revenue de-growth can be attributed primarily to the economic slowdown, DLF has itself to blame for its troubles.
One reason why the company’s borrowings increased was its forays into capital-intensive expansions. It entered the hospitality segment, acquiring a controlling stake in Singapore-based Aman Resorts in November 2007, for around $400 million. The company also diversified into non-core activities such as wind and other power business, at an investment of Rs 1,000 crore in 2007. Second, expansions planned in southern cities faced hurdles.
Source: The Hindu Business Line
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