accounting

1. ICFAI BUSINESS SCHOOL
ANUSHREE SRIVASTAVA 22BSPDD01C027
BINDIYA SINGH 22BSPDD01C048
MONALISHA MAL 22BSPDD01C102
SRIJA SWARAJ 22BSPDD01C156
CLASS: MBA (2022-2024)
SUBJECT: Advanced Financial Management
Submitted to: Dr. Deepti kiran

2. Introduction
• Delhi, Lease and Finance Ltd. (DLF) is india’s
largest real estate development company has
been capitalizing on the efficient growth
opportunities of the emerging economy.
• It was Founded in 1946 by Chaudhary
Raghvendra Singh and started with the creation
of 22 urban colonies in Delhi.
• It has earned ‘Superbrand’ ranking with its six
decades of experience and focus on
commitment to quality, trust, customer
sensitivity.
.

3. Role of Real
Estate in
Indian GDP
 The Real Estate sector plays a prominent role
in Indian Economy as It has been the most
appealing sector for investment.
 It is placed second in employment and
contributes approximately 9% of the Indian
GDP (INR 1 invested in this sector results in
an addition of 78 paise to the GDP).
 About 250 ancillary industries such as
cement, steel, brick, etc., are dependent on
the real estate, making it an extremely
prominent sector of the country.
.

4. Reason for
the Real
Estate
Growth
 Rapid urbanisation, increasing working population
and decreasing household size are the few key drivers
for the growth.
 The Government of India eased rules on foreign
investment in the construction industry in 2005.
 The growth in IT and IT-enabled Services sector has
also pumped up the growth with land requirement of
150 million sq.ft., of office space by 2010.
 The growth in the organised retail is also responsible
for the increasing growth in the commercial office
space with the requirement of 220 million sq.ft. by
2010.
.

5. Effect of global meltdown and recession
 Inflation reached 13% in India in August 2008.
 The credit crunch and economic slowdown had affected demand and
supply in the real estate sectors.
 Every big property witnessed the price fall of about 30%-50%.
 Most of the companies stopped working on their projects due to lack of
demand and liquidity crunch and DLF (It had stopped its construction
work on 16 million sq.ft. project in Sonepat district, Haryana) is one of
them .
 Also the investors were affected as the share price of the real estate
companies fell by 40%-70%
.

6. DLF’s
Investment
in
Working
Capital
 DLF, the leader of the real estate industry in terms
of revenue, earnings, market capitalization and
developable area.
 The company made its IPO in July 2007, price at
INR 525 per share.
 Net income has grown from INR 4,094 million in
2006 to INR 78,120 million in 2008.
 Revenue has grown at a CAGR of 174% from INR
19,602 million in 2006 to INR 146,839 million in
2008.
.

7. Business model of DLF
 Unique business model of DLF’s is a
mix Of both development and rental
earnings with multi-business and multi
segments within each business.
 Across segments and geographies and
with a presences in around 32 cities
across 18 states of the country.
 DLF mitigates risks that arise due to
business cycle.
.

8. Working Capital Management
 Decisions relating to working capital are referred to as working capital
management. Management of working capital refers to management of CA
as well as CL.
 If current assets are less than current liabilities, an entity has a working
capital deficiency, also called a working capital deficit.
 These involve managing the relationship between a firm’s short term
assets and its short term liabilities.
 It measures how much in liquid assets a company has available to build its
business.
.

9. DLF Strategies to
maintain W.C.
cycle
 Timely delivery of pre sold or leased
projects.
 Developed and delivery 7 million sq.ft of
area to its customer.
 Exited from long gestation projects like
Bidadi, Mysore.
 Differed 27 million sq.ft for office and
retail development.
 Started focusing on mid income housing to
generate cash flow from its operations.
 Gross margin on the project stood at 20% -
25% with affordable housing strategy.
 Overall cost reduction 15%-20% benefited
the customers.
.

10. Continue…
 They tied good amount of capital in raw
materials, work in progress and technology
 Centralization of cash credit system and for
working capital requirements estimation of
expenses is made and budget is prepared on
the basis of cash inflows and outflow
 Tracking of receivables and payables to track
money received as advance, dispatch of
finished good and money recoverable
 They also planned to raise INR 5500cr from
the sale of non core assets.

11. Changed Economic Scenario
• India witnessed an increasing
demand for both the residential
and commercial real estate
properties till late 2008.
• However, the global financial
crisis, an outcome of the sub-
prime crisis in the US , and the
subsequent collapse of many big
corporations, worsened the
economic environment across the
globe and in India as well.
.
Effect of Economic slowdown
• Revenue declined by 28.96%
• Net profit margin decrease to
42.848%
• Cost of generating revenue was
31.42% of revenue in 2009.
• High interest rates increased the
finance cost from INR 3,099 to
INR 5,584 Million.

12. Analysis
and impact
of
strategies
 In 2009, short term borrowings decreased by
32.31% and long term borrowings increased by
50% amounting to INR 147,629 million.
 Gross working capital increased to INR 316,224
million.
.
 Company had enough liquid assets to meet short term
obligations as a result they extended more credit period to
its suppliers.
 Inventory processing period reached 357 days whereas its
1,134 for sector and 822 days for Ansal properties.
 Total receivables amounted to INR 96,291 billion with a
conversion period of 160 days.

13.  Working capital turnover ratio is fluctuating due to the fluctuating cost of
capital and amount of net current assets.
 For the first two financial years the ration remained constant as the proportion
of increment of cost of capital and working capital is same as the previous year
07. The overall ratio does not indicate any steady growth of working capital.
 Inventory to working capital ratio has increased in 2008-2009 due to the
increase in cost of inventories.
 Ratio of current assets to fixed assets is gradually decreasing. It is because of
the increase of fixed assets which indicates the strong fixed assets in the
company balance sheet.
.