DLF - Icici

Equity Research
June 18, 2008 BSE Sensex: 15422
INDIA
DLF
Colossus in the making
BUY
Rs493
Real Estate
Shareholding pattern
Promoters Institutional investors 0.4 0.3 MFs and UTI Insurance Cos, 0.2 0.2 Banks, FIs FIIs 7.3 7.9 4.0 3.5 Others Source: www.nseindia.com Sep 06 88.2 7.9 Dec 07 88.2 8.4 Mar 08 88.2 8.2 0.6 0.1 7.6 3.6
Price chart
1,400 1,200 1,000 (Rs) 800 600 400 200 Jul-07 Jan-08 Nov-07 Sep-07 Apr-08 Jun-08
Reason for report: Initiating coverage DLF, Indias largest real-estate developer, has a credible track record of over six decades in developing marquee commercial, residential & retail projects. The company has a land bank of 751mn sqft (79% in metros & super metros) spread across 32 Indian cities. It stands out as a premier play on Indian real estate, with a business model that has the right mix of brand, growth, execution, management and new initiatives. We estimate DLFs NPV at Rs1,198bn or Rs703/share; initiate coverage with BUY recommendation. Play on India real estate Premium landbank. DLF has the largest landbank of 751mn sqft spread over 32 major Indian cities. It has a diversified portfolio of residential (477mn sqft), office (164mn sqft), retail (92mn sqft), hospitality (18mn sqft), townships and SEZ projects. It has superior regional & segmental diversification mitigating concentration risks and providing cashflow stability (>50% of sales to come from outside NCR over the next two years). Given its well located, low-cost landbank (~Rs315/sqft), we expect DLF to continue posting high margins. Volume growth & burgeoning lease portfolio. DLF plans aggressive ramp-up in mid-income housing (58% landbank; ~17% of our NAV), given the high volume growth potential. However, volume growth would happen via aggressive pricing, impacting margins. DLFs leased portfolio is set for sharp growth over the next 5 years; we expect it to reach ~70mn sqft, accruing steady annual rentals of ~Rs71bn. DLFs bulging lease portfolio contributes ~40% of our NAV. JVs Growth drivers. DLF has struck JVs with strategic partners across segments to facilitate growth & better execution, including Laing ORourke, WSP, Feedback Ventures, Hilton & Aman Resorts (acquisition). Also, DLF has tie-ups with Prudential Inc, Nakheel Group, Limitless Group, Fortis, Gayatri Projects & Fraport AG. Property-market concerns. We have viewed DLF against a frail, near-term property market backdrop and other key concerns (affordability, oversupply & rising input cost) (details in Key risks section below). We have assumed 20% price correction in sales & rental value; however, we do not foresee any further serious price correction. We believe affordability to improve with price correction as fundamental drivers still remain intact. Remain upbeat on long-term prospects of Indian realty. Attractive valuations. DLF trades at significant discount to our NAV estimates of Rs1,198bn or Rs703/share, trading close to our worst-case valuations. We expect earnings CAGR of 10% over FY08-11. Based on our FY09E, FY10E & FY11E EPS estimates of Rs51, Rs56 & Rs62, DLF trades at P/E of 9.4x, 8.5x & 7.8x respectively. DLF is a de facto play on India real estate. Initiate coverage with BUY.
Market Cap Reuters/Bloomberg Shares Outstanding (mn) 52-week Range (Rs) Free Float (%) FII (%) Daily Volume (US$'000) Absolute Return 3m (%) Absolute Return 12m (%) Sensex Return 3m (%) Sensex Return 12m (%) Rs840.4bn/US$19.6bn DLFU IN/DLF.BO 1705 1205/480 11.8 7.6 72,000 (20.9) NA 2.9 7.9 Year to March Revenue (Rs mn) Net Income (Rs mn) EPS (Rs) % Chg YoY P/E (x) CEPS (Rs) EV/E (x) Dividend Yield (%) RoCE (%) RoE (%) FY08 142,287 78,558 46.1 264.7 10.7 10.3 9.8 0.8 34.3 70.8 FY09E 174,464 87,099 51.1 10.9 9.4 9.2 8.5 1.0 23.6 37.8 FY10E 207,988 95,910 56.3 10.1 8.5 8.2 7.6 1.2 20.4 30.8 FY11E 237,943 104,770 61.5 9.2 7.8 7.4 7.2 1.4 17.8 26.3
Gaurav Pathak
gaurav_pathak@isecltd.com +91 22 6637 7339
Shaleen Silori
shaleen_silori@isecltd.com +91 22 6637 7188
Please refer to important disclosures at the end of this report
DLF, June 18, 2008
ICICI Securities
TABLE OF CONTENT
De facto India real-estate play ........................................................................................3 Premium landbank ..........................................................................................................4 Riding the Indian real-estate growth wave......................................................................5 Volume growth .................................................................................................................6 Burgeoning lease portfolio .............................................................................................8 Joint ventures Growth enablers ................................................................................10 DLF valuations ...............................................................................................................13 Assumptions..................................................................................................................15 Sensitivity analysis ........................................................................................................17 Earnings analysis ..........................................................................................................18 Why premium valuations...............................................................................................18 Risks................................................................................................................................21 Property market concerns and outlook .........................................................................23 Profile ..............................................................................................................................27 Business segments .......................................................................................................30 Residential ....................................................................................................................30 Office .............................................................................................................................34 DLF Assets (DAL) .........................................................................................................38 Retail .............................................................................................................................39 Hotels ............................................................................................................................41 SEZs..............................................................................................................................45 Township .......................................................................................................................46 Cumulative construction schedule ................................................................................47 Annexure 1: Financials..................................................................................................48 Annexure 2: Index of Tables and Charts .....................................................................52
DLF, June 18, 2008
ICICI Securities De facto India real-estate play

DLF has a landbank of 751mn sqft spread across 32 major cities in India. The company has a diversified portfolio of residential (477mn sqft), office (164mn sqft), retail (92mn sqft), hospitality (18mn sqft), townships and SEZ projects. It has the largest landbank, with superior regional and segmental diversification to mitigate concentration risks and provide better stability to cashflows. We continue to remain upbeat on the long-term prospects of Indian realty, in which DLF is a de facto play. Historically, DLFs activities had been largely localised in the NCR (National Capital Region). However, over the past two years, the company has acquired land across the country to expand its geographic footprint and emerge as Indias leading real estate developer. It intends to replicate its success in the NCR, across the country. We estimate over 50% sales for DLF over the next two years from outside the NCR, including key locations in South, East and West India. In line with the strategic thrust to reduce concentration in North India and de-risk the business model, DLF has planned several projects in Kolkata, Chennai, Bangalore, Mumbai, Pune and Hyderabad. These regions are amongst the fastest growing, but would entail differences in terms of buyer preferences and degree of competition from leading regional players. Accordingly, the initial foray into these regions is partly through JVs/JDAs. ~79% of DLFs landbank is located in super metros and metros. ~691mn sqft or 92% of the overall landbank is held directly by the company (including lands yet to be allocated from the State Governments), giving us comfort on title risk. Table 1: Regional classification
Region NCR & Mumbai Chennai, Bangalore & Kolkata Chandigarh, Pune, Goa, Cochin, Nagpur, Hyderabad, Coimbatore & Bhubaneswar Vadodara, Gandhinagar, Ludhiana, Amritsar, Jalandhar, Sonepath, Panipat, Lucknow, Indore, Shimla Tier II Source: Company data Description Super metros Metros Tier I
Chart 1: DLF landbank Regional break-up
Tier II (32, 4%) Tier I (123, 16%) Super Metros (251, 33%)
Metros (345, 47%)
(mn sqft, %)
Source: Company data, I-Sec Research
DLF, June 18, 2008 Chart 2: Expanding footprint across India
ICICI Securities
Source: Company data
Premium landbank
DLFs landbank is primarily located in the NCR, Kolkata, Chennai and Bangalore, which are high-margin locations where significant commercial, retail and residential demand is expected. DLF has also acquired land in up-market locations in New Delhi and Mumbai; where the company plans to develop super-luxury apartments. In Mumbai, DLF had also acquired 17.5 acres of land at NTC Mills to develop office cum retail space. DLF has total developable area of 751mn sqft in various regions across India. Of this, 79% is in super metros and metros. The company has a diversified portfolio of residential (477mn sqft), office (164mn sqft), retail (92mn sqft), hospitality (18mn sqft), townships and SEZ projects. DLFs average land cost stands at Rs315/sqft, owing to historical acquisition costs; this provides key long-term competitive advantage to the company. Table 2: Segmental classification
(mn sqft) Landbank Offices Retail Housing Hotel Total Source: Company data 164 92 477 18 751
DLF, June 18, 2008
ICICI Securities
Riding the Indian real-estate growth wave
Key growth drivers for real estate are: i) sustainable economic growth, ii) favourable demographics, iii) growth in IT/ITES, manufacturing & organised retail, iv) increasing demand in hotels and logistics sectors, and v) rising direct & indirect investments in real estate. These drivers continue to remain intact, though we have seen deceleration in growth rate of key parameters over the past few months. We believe there exists tremendous opportunity for developers to capture the burgeoning real estate market. However, developers need to re-invent themselves to meet changing customer needs and offer differentiated quality products at the right price point. We estimate the average annual demand for office & retail space at 70mn sqft & 40mn sqft respectively for the next four years. For residential units, it is difficult to estimate demand of the target segment addressed by real estate developers we estimate demand of 450-550mn sqft, including 100-130mn sqft for the high-end residential segment (properties with ticket-size of over Rs2.5mn). We estimate current size (based on money invested) of Indian real estate market at US$57bn or 6.2% of Indias GDP. In terms of value, the real estate market would likely post 12.8% CAGR over the next four years to US$105bn or 7.1% GDP by FY12E. In the next four years, average annual investment required in real estate is ~US$85bn, of which the residential segment constitutes 88% at US$74bn. We estimate annual investments of US$5.7bn for office space and US$4.8bn for retail. The size of investments is not based on sales but on monetary requirement for land & construction costs to meet intrinsic real estate demand. Sales mark-up on costs could vary with market conditions; also, a major part of residential real estate activity is not captured in sales. Going forward, hotels, logistics and warehousing would create significant real estate demand. As per industry estimates, 100,000-125,000 hotel rooms would be added in the next five years, with setting up of ~100 economy hotels in India.
DLF, June 18, 2008
ICICI Securities Volume growth

DLF has aggressive ramp-up plans in mid-income housing (58% landbank); the segment holds maximum potential on the back of volume growth. ~17% of our NAV comes from mid-income housing; we estimate value of mid-income housing at Rs201bn or Rs118/share. DLF has an aggressive roll-out plan for the residential segment over the next 3-5 years, with a large landbank to support its development plans for the next 10 years. We expect steep volume growth, albeit margin contraction, over the next few years. We expect DLF to launch 477mn sqft of residential development, including 432mn sqft of mid-income housing, over the next 10 years. Also, we expect developments in metros and super metros to contribute ~53% and ~26% respectively to the pipeline of mid-income housing projects. The company is planning to launch mid-income housing projects in Chennai, Indore, Kochi and Lucknow in the next few months. DLF intends to take its steady state annual delivery in mid-income segment to ~30mn sqft. However, the company is pursing an aggressive sales strategy. DLF is selling residential projects at lower-than-market prices to increase volume. Also, sales are booked on lower upfront payment, resulting in high creditor growth and, thereby, affecting sales quality. Absorption will remain a critical risk to DLFs growth strategy in mid-income housing. Assuming DLF executes its development plan, it could capture 25-30% of Indias overall mid-income housing market share. We believe that this is unlikely as DLFs current market share in less than half the target market share; also, competitors have aggressive ramp-up plans. On the other hand, DLFs brand and execution capabilities will help it garner higher market share. We have assumed a 20% drop in mid-income selling prices to account for the pricing pressure that DLF would face in selling large volumes. We expect the mid-housing segment to contribute 63% to the residential NAV (17% to overall NAV).
Table 3: Mid-income housing Development schedule

FY09 Development schedule Super Metros Metros Tier I Tier II Grand Total New launches Super Metros Metros Tier I Tier II Grand Total 0.5 5.6 4.8 2.4 13.3 FY10 6.0 10.0 11.2 3.1 30.3 FY11 13.5 15.1 13.7 2.7 45.0 FY12 24.4 22.5 14.5 1.8 63.1 FY13 32.6 31.6 16.2 1.9 82.3 FY14 40.1 45.1 20.2 2.6 108.0 FY15 52.0 63.9 24.9 3.6 144.3 FY16 51.4 75.8 22.9 4.1 154.1 FY17 47.2 84.0 18.4 4.0 153.6 FY18 36.3 79.6 12.2 3.0 131.1 FY19 20.9 57.9 6.2 1.7 86.7 FY20 9.9 30.4 2.6 0.7 43.6 FY21 3.1 10.0 0.7 0.2 14.0 FY22 0.3 0.0 0.1 0.0 0.4
0.5 6.7 4.8 2.4 14.3
5.7 8.0 7.9 1.5 23.0
9.3 11.7 6.3 0.7 28.0
15.6 16.0 6.9 0.7 39.2
16.4 19.1 8.1 1.0 44.7
17.6 25.1 9.6 1.4 53.6
22.6 31.6 10.0 1.6 65.8
17.0 33.6 6.3 1.6 58.5
13.9 34.2 4.0 1.3 53.4
7.1 25.8 1.7 0.5 35.1
1.0 9.8 0.2 0.0 10.9
0.0 0.0 0.0 0.0 0.0
0.0 0.0 0.0 0.0 0.0
0.0 0.0 0.0 0.0 0.0
Handed over Super Metros 0.0 Metros 1.6 Tier I 0.0 Tier II 0.0 Grand Total 1.6 Source: Company data, I-Sec Research
0.2 3.6 1.4 0.7 5.9
1.9 6.6 3.8 1.2 13.4
4.7 8.6 6.1 1.6 21.0
8.2 9.9 6.4 0.9 25.4
10.1 11.7 5.5 0.6 28.0
10.7 12.8 5.3 0.7 29.5
17.6 21.7 8.4 1.1 48.8
18.1 26.0 8.5 1.3 53.9
18.0 30.3 7.9 1.5 57.6
16.3 31.5 6.2 1.3 55.4
11.0 27.4 3.6 1.0 43.0
6.8 20.4 1.9 0.6 29.7
2.7 11.5 0.7 0.2 15.0
DLF, June 18, 2008 Table 4: Mid-income housing Construction schedule

FY09 FY10 Super Metros 0.2 1.9 Metros 3.6 6.6 Tier I 1.4 3.8 Tier II 0.7 1.2 Grand Total 5.9 13.4 Source: Company data, I-Sec Research FY11 4.7 8.6 6.1 1.6 21.0 FY12 8.2 9.9 6.4 0.9 25.4 FY13 10.1 11.7 5.5 0.6 28.0 FY14 10.7 12.8 5.3 0.7 29.5 FY15 17.6 21.7 8.4 1.1 48.8 FY16 18.1 26.0 8.5 1.3 53.9 FY17 18.0 30.3 7.9 1.5 57.6 FY18 16.3 31.5 6.2 1.3 55.4
ICICI Securities
FY19 11.0 27.4 3.6 1.0 43.0 FY20 6.8 20.4 1.9 0.6 29.7 FY21 2.7 11.5 0.7 0.2 15.0 FY22 0.3 3.4 0.1 3.8
Table 5: Mid-income housing Sales schedule

FY09 FY10 Super Metros 0.1 1.5 Metros 3.0 6.4 Tier I 1.2 3.2 Tier II 0.6 1.0 Grand Total 4.9 12.0 Source: Company data, I-Sec Research FY11 4.0 8.3 5.9 1.7 19.9 FY12 8.3 10.1 6.9 1.1 26.3 FY13 11.1 12.8 6.1 0.7 30.8 FY14 9.9 12.0 4.9 0.6 27.5 FY15 17.6 21.6 8.3 1.1 48.5 FY16 18.0 25.7 8.4 1.3 53.4 FY17 17.7 29.9 7.9 1.4 57.0 FY18 16.6 31.4 6.4 1.3 55.7 FY19 11.2 27.4 3.7 1.0 43.3 FY20 7.2 20.8 2.0 0.6 30.6 FY21 3.0 12.3 0.7 0.2 16.2 FY22 0.4 3.9 0.1 4.4
Chart 3: Residential segment break-up

Super Luxury 9% Luxury 1%
Mid Housing 90%

Chart 4: Mid-income housing Regional break-up

Tier II 4% Tier I 17% Super Metros 26%
Metros 53% Source: Company data, I-Sec Research
DLF, June 18, 2008
ICICI Securities Burgeoning lease portfolio

Going forward DLFs leased portfolio will grow sharply, providing strong lease income. We expect DLFs leased portfolio to reach 70mn sqft (Office: 42mn sqft, Retail: 19mn sqft, Hotel: 9mnsqft) over the next five years, accruing steady annual rentals of ~Rs71bn. Also, the portfolio may reach ~136mn sqft (Office: 76mn sqft, Retail: 43mn sqft retail, Hotel: 17mnsqft) over the next 10 years, taking annual rentals to ~Rs136bn. However, DLFs lease rental strategy could change on the basis of the proportion of commercial developments sold or leased. We estimate value of DLFs leased portfolio at Rs481bn or Rs304/share; ~40% of our NAV comes from the leased portfolio. We believe that DLF would follow a 50:50 mix (lease:sale) strategy for its office properties. This helps DLF meets its short-term cashflow requirements with long-term goal of being an asset-heavy company with steady cashflows for future initiatives. DLF also has a Facility Management Services arm that looks after the day-to-day management of rented facilities. Currently, DLF has ~10mn sqft of leased space, ~8mn sqft of office space and 2mn sqft of retail space. DLF has strong relationships with its corporate and retail customers. Its client base includes 70 of the Fortune 500 companies. DLF boasts of 110 corporate client relationships, including Accenture, Microsoft, Canon, Nokia, Sapient, IBM-Daksh, ABN Amro, Alcatel, Deutsche Bank, WNS, GE Capital, BOA, IBM, Reliance, Benetton, BMW, PWC, Yes Bank, E&Y, Genpact, Fidelity, Citibank, Xerox, Max New York Life. In the retail mall space, DLF has formed lasting relationships with Trent, Pantaloons, DT Cinema, Landmark and Arvind Mills as its anchor tenants. In the hospitality space, DLF is looking to tie up with Hilton, Aman Resorts and a couple of other premium brands/operators for its hotel outlets. Chart 5: Cumulative lease area
120 100 80 (mn sqft) 60 40 20 0 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 Office Retail Hotel
DLF, June 18, 2008 Table 6: Cumulative lease area

(mn sqft) FY09 FY10 FY11 Office 13.1 20.5 30.5 Retail 3.2 5.3 9.3 Hotel 0.0 0.0 0.6 Total 16.2 25.8 40.5 Source: Company data, I-Sec Research FY12 35.8 13.5 2.6 51.9 FY13 42.3 19.1 8.8 70.2 FY14 49.8 24.8 14.7 89.2 FY15 52.3 28.3 16.6 97.2 FY16 60.4 33.6 16.6 110.7 FY17 69.5 38.6 16.6 124.7 FY18 76.5 42.9 16.6 135.9
ICICI Securities
FY19 84.2 46.1 16.6 146.9
FY20 90.3 48.0 16.6 155.0
FY21 94.1 48.8 16.6 159.6
FY22 97.3 49.0 16.6 162.9
DLF, June 18, 2008
ICICI Securities Joint ventures Growth enablers

DLF has formed JVs with strategic partners in the construction, hospitality, real estate & financial segments to facilitate its growth going forward. Its JV with Laing ORourke (LOR), WSP and Feedback Ventures (FV) for civil construction & design will provide strength to its execution capabilities. Its hospitality JV with Hilton and acquisition of Aman Resorts will further aid its entry into the luxury & business category hotels. Going forward, we expect the company to foray to various other businesses via strategic tie ups, JVs and acquisitions.
Infrastructure 50:50 JV with Laing ORourke Plc

DLF entered into a JV with LOR, a leading UK-based construction company, to expand its operations in infrastructure development. The JV has an order book of ~Rs60bn and already commenced construction on 16 projects covering 40mn sqft of development. The JV will primarily execute DLFs aggressive ramp-up plans in real estate and may also participate in other infrastructure initiatives such roads, bridges, tunnels, pipelines, harbours, runways and power projects.
Design and Engineering 50:50 JV with WSP

DLF has entered into a JV agreement with WSP to provide engineering & design services, environmental & infrastructural facilities as well as project management services. The JV will carry out design & engineering work for majority of the companys projects.
Project management 19% share in Feedback Ventures

DLF has acquired 19% equity in FV, which is in the business of providing consulting, engineering, project management & development services for infrastructure projects in India. DLF plans to leverage FVs management consulting services by streamlining the planning & execution capabilities for its infrastructure, SEZs and townships.
Hotels 74:26 JV with Hilton

DLF is looking to invest Rs407mn in its 74:26 JV with Hilton over the next 5-7 years. The JV will develop 50-75 hotels in 22 cities with total room capacity of 5,000 in the business, five- & four-star and deluxe hotels. The company has acquired 51 sites, with projects in various stages of design, development & execution. Also, DLF has a JV with Bharat Hotels for developing & operating a hotel-cum-convention centre at Chandigarh.
Multiplexes 100% subsidiary DT Cinema

DLF currently runs two multiplexes with capacity of six screens and 1,328 seats. DT Cinema is developing five more multiplexes with additional seat capacity of 5,975. DLF intends to ramp-up DT Cinema sharply, increasing screens to 300 in the next five years and ~450 by FY15. Multiplexes are expected to come up in most metros including Mumbai, Chennai, Hyderabad, Bangalore and Ludhiana. DT Cinema is one of DLFs key anchor tenants, managing food courts in DLF malls. DLF leases out 515% of its mall space to DT Cinema. The strategy of having DT Cinema as a key anchor tenant in its malls is working well for DLF.
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DLF, June 18, 2008
ICICI Securities
Integrated townships 50:50 JV with Nakheel
DLF will develop two integrated township projects with a size of 20,000 acres each in Gurgaon and Goa. Nakheel is one of the premier real-estate developers in the United Arab Emirates (UAE), with focus on development of large residential, tourist, commercial and retail real estate. Properties developed by Nakheel include the Palm Islands, The World Islands, Jumeirah Lake Towers, Discovery Gardens, Lost City and Ibn Battuta Mall.
Airport modernisation JV with Fraport AG Frankfurt Airport Services Worldwide

DLF has entered into an agreement with Fraport AG Frankfurt Airport Services Worldwide, with both entities expected to hold minimum 26% in the JV, which is aimed at exploring and undertaking projects such as: i) bidding for Chennai airport, ii) design, construction, development, operation & management of greenfield airports in India.
JV with the MG Group and Delanco Real Estate Pvt

DLF has also formed JVs for participating in project opportunities with financial and strategic investors such as the MG Group and Delanco Real Estate Private.
JV with Haryana State Industrial & Infrastructure Development Corporation (HSIIDC)

DLF has entered into a JV with HSIIDC for developing SEZ of ~20,000 acres in Gurgaon and ~3,000 acres in Ambala. A special purpose vehicle (SPV) would be created in the form of a limited company to implement the project. Initial shares of the SPV would be held by DLF and HSIIDC, which would facilitate with the Government of Haryana to notify the project land as SEZ under the provisions of the Haryana SEZ Act, 05.
MoU with Gayatri Projects

DLF has signed an MoU with Gayatri Projects (GPL), a key infrastructure company in India, to develop roads and highway projects across the country. Together, DLF and GPL aim to develop projects worth at least Rs10bn annually and, consequently, build a strong project portfolio. Under the terms of the agreement, DLF & GPL would together leverage the strengths of both parties to form SPVs for development of highways. DLF-LOR, the JV between DLF and LOR, would be the contractor DLFGPL projects. This strategic collaboration will provide DLF entry into Indian infrastructure development.
Insurance 74:26 JV with Prudential Inc of US

DLF will invest up to US$250mn (over the next 5-10 years) for its 74% stake in the life insurance venture with Prudential Inc. Pursuant to the agreement, the JV company would develop, promote, market and sell life insurance products in India on an exclusive basis. DLF has also formed a JV (39:61) with Prudential Inc for providing asset management services.
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DLF, June 18, 2008
ICICI Securities
Healthcare 26:74 JV with Fortis Healthcare
DLFs JV with Fortis will develop, own and operate 250-400 bed hospitals with a minimum built-up area of 20,000 square metres and such other healthcare facilities, which would be built by the JV company at various sites on land that has either been purchased or leased from DLF or its affiliates in India. The hospitals will be operated and managed under the exclusive Fortis brand. Further, the company has signed an agreement with the United Kingdom Sciences Park Association to explore opportunities to jointly develop biotechnology parks in India.
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DLF, June 18, 2008
ICICI Securities DLF valuations

We have valued DLF on asset-based methodology (NAV/DCF); we are more comfortable valuing the company on NAV as against earnings multiple. We estimate fair value of DLFs project pipeline of 751mn sqft executed over FY09E-22E based on discounted cashflows at Rs1,198bn or Rs703/share. The NAV is post tax and highlights the fair value that can be assigned to the companys assets; market cap premium/discount to NAV will depend on investor confidence, sentiments towards property market, future initiatives and liquidity conditions etc. Our valuations also include Rs85bn (7% of NAV) value of other assets on the books of the company and Rs83bn (7% of NAV) terminal value, on going-concern basis. Office, residential, retail and hotels segment contribute 44%, 27%, 23% and 3% to the overall NAV respectively. Rented properties within the office, retail and hotels segment cumulatively account for 40% of the overall NAV. We estimate mid-income housing to contribute 63% to Residential NAV and 17% to the overall NAV. Table 7: Valuations
Valuations Office Residential Retail Hotels Other assets (JV, acquisitions, auxiliary businesses) Terminal value Net debt Discounted land cost payable Total value Value/share (Rs) Source: I-Sec Research (Rs bn) 529 319 271 32 85 83 (74) (47) 1,198 703 % contribution to NAV 44 27 23 3 7 7
Office segment
We have valued DLFs office segment at Rs529bn (44% of overall value), based on a development pipeline of 164mn sqft to be completed over the next 10 years. We have assumed 4% YoY increase in rentals and 6% YoY increase in selling price and construction costs. We expect the rented properties to contribute 57% to the overall office NAV and the remaining contributed by outright sale. We have assumed a 50:50 mix of sales and rental development.
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DLF, June 18, 2008 Chart 6: Office segment Valuations breakup
ICICI Securities
Sales 43% Rental 57%
Source: I-Sec Research
Residential segment
We value the Residential segment at Rs318bn (27% of overall NAV) based on development pipeline of 477mn sqft to be executed in the next 12 years. Further, we value the Mid-income Housing segment at Rs200bn based on 432mn sqft development; the segment contributes ~63% to the Residential segment. We have assumed 6% YoY increase in selling price & construction cost. The remaining valuation is from the Luxury and Super Luxury segments. Chart 7: Residential segment Valuations breakup
Super-luxury 9%
Luxury 28% Mid-income 63%
Retail segment
DLFs retail segment has been valued at Rs271bn based on a development pipeline of ~92mn sqft over the next 10 years. We have assumed 4% YoY increase in rentals and 6% increase in construction cost. We have also assumed lease-to-sales ratio of 50%. Lease income valuation accounts to 54% of the total retail NAV, with the remaining being contributed by outright sales.
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DLF, June 18, 2008 Chart 8: Retail segment Valuations breakup
ICICI Securities
Rental 54%
Sales 46%
Assumptions
Price assumptions
Our fair value estimate of DLF, based on NAV, stands at Rs1,198bn or Rs703/share. The valuations are based on price assumptions for sales and construction across segments (office, retail & residential; Table 8). Given the softness in the property market, we have assumed 20% drop in selling prices and 20% drop in rentals to calculate NAV. DLF has aggressive growth plans in the mid-income category; to execute such plans, DLF may undercut market prices to push sales. We have assumed a cap rate of 10% each for office and retail properties. We have assumed inflationary growth of 6% YoY in selling price & construction cost and 4% YoY growth in lease rentals. Table 8: Assumptions
(Rs/sqft) Selling prices Super Metros Metros Tier 1 Tier 2 Rentals office (Rs/sqft/mth) 84 38 28 22 Rentals retail (Rs/sqft/mth) 112 56 44 28 Retail 2,520 2,064 1,579 1,350 Mid Housing 3,400 2,530 2,176 1,904 Super Luxury 16,000 5,120 3,840 2,560 Luxury 7,200 3,456 2,304 2,016 Luxury 1,800 1,638 1,400 1,197 Office 10,080 4,608 3,360 2,688 Retail 13,440 6,720 5,280 3,360
Construction cost Office Super Metros 1,800 Metros 1,556 Tier 1 1,330 Tier 2 1,161 Decrease in selling prices (%) 20 Residential prices 20 Rentals Cap rate (%) Office Rental Launch delay Yearly launch delay (%) Cumulative launch delay (%) Source: I-Sec Research 10 10 FY11 5 5
Mid Housing Super Luxury 1,600 2,200 1,396 1,902 1,256 1,369 1,131 1,109 Execution delays (days) upto FY11 180-360 beyond FY11 360-720 Discount rate (%) Cost of equity Cost of debt Discount rate FY13 FY14 5 5 16 22
14.7 12.0 14.4 FY15 5 28
FY12 5 10
FY16 5 34
FY17 5 41
FY18 5 48
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DLF, June 18, 2008
ICICI Securities
Other assumptions
Capitalisation rate We have assumed 10% cap rate to value lease properties. Current G-Sec yields in India are above 8%; cap rate for real estate assets should ideally be at premium to GSec rate to account for risk premium. However, at times, cap rate can move to negative spread as well, if investors price-in future capital appreciation in the Indian property market due to favourable demographics and robust GDP growth. In developed real estate markets such as USA, Singapore and Hong Kong, cap rates are within the 5-7% range, in line with respective regional G-Sec rates. Over the past two years, there has been a spread compression due to reduction in long-term risk premium attached to the property market, high liquidity and assumption of capital appreciation in real estate assets. We have assumed 14.4% as discount rate, on the basis of 14.7% cost of equity and 12% cost of debt. Execution assumptions DLF has aggressive ramp-up plans going forward, which would result in annual projects under development to ~169mn sqft and annual delivery to the tune of ~60mn sqft. We believe that these plans will be difficult to execute and, hence, we have assumed delay of six months to a year in execution till FY11E, post which we have assumed a 1-2 year delay. Further, the companys development plans seem aggressive; therefore, we have discounted the launch plans by 5% (compounded annually) from FY11, i.e. implying ~50% delay in 10 years. Terminal value Given that real estate development is an ongoing business for DLF and that the company will continue to add more projects to its portfolio, we have assigned terminal value of Rs83bn or Rs49/share to DLF, i.e. 7% for our NAV. Terminal value is based on an assumption of ~40mn sqft of annual delivery and profit realisations of ~Rs1,000/sqft. Our terminal value does not include any growth in profits. Table 9: Terminal value
Average run rate (mn sqft) PAT (Rs/sqft) Cash value (Rs bn) Terminal value (Rs bn) Discounted value (Rs bn) Source: I-Sec Research 40 1,000 40 279 83
Other assets We estimate fair value of other assets of DLF at Rs85bn or Rs50/share, of which the key are developed plots of 7.5mn sqft sitting in the companys books, DLFs facility management business and JV with LOR.
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DLF, June 18, 2008 Table 10: Valuations Assets on book

Assets on Book Developed plots Other assets DT cinema Facility management services LOR JV Total Source: I-Sec Research
ICICI Securities
Comments 7.5mn sqft on books DLF Power, Golf course Expected to have 450 screens by FY15 Expected to reach $1bn revenue by FY11E 50:50 JV; current order book ~40mn sqft or ~Rs60bn Value (Rs bn) 41 4 5 20 15 85
Option value not included DLF has signed key JVs across other verticals that could lead to significant value creation going forward. We have assigned no value to such JVs, which may lead to further upside in our estimated NAV. Table 11: Option value
SEZ (multi product) MoU Nakheel JV Prudential MoU Gayatri Projects Source: I-Sec Research 26,000 acres in Gurgaon, Amritsar, Ambala and Ludhiana 2 townships of 20,000 acres each Insurance and Asset management business To develop projects worth at least Rs10bn every year
Sensitivity analysis
We have analysed sensitivity of our NAV calculations to changes in prices and cap rates (Table 12). Worst case scenario 30% drop in selling prices, 30% drop in rentals and rental cap rate of 12% Probable scenario 20% drop in selling prices, 20% drop in rentals and 10% rental cap rate Best case scenario 10% drop in selling prices, 10% drop in rentals and 9% rental cap rate Table 12: Scenario analysis
(Rs bn) Valuations Scenario Analysis Office Residential Retail Hotels Other assets (JV, acquisitions, auxiliary businesses) Terminal value Net debt Discounted land cost payable Total value Value/share (Rs) Source: I-Sec Research Case I Worst Case 376 216 188 21 77 75 (74) (47) 832 488 Case II Probable Case 529 319 271 32 85 83 (74) (47) 1,198 703 Case III Best Case 672 430 348 39 94 92 (74) (47) 1,554 912
We have taken the probable scenario of 20% drop in selling prices, 20% drop in rentals and 10% rental cap rate in our valuations. We estimate that 1% change in cap rate would lead to 6.6% change in NAV and 5% drop in selling prices and rentals would lead to 9.9% change in NAV.
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DLF, June 18, 2008
ICICI Securities
Earnings analysis
We estimate that DLF would deliver FY09E revenue and PAT of Rs174bn and Rs87bn respectively. Over the next three years (FY08E-11E) we estimate revenue and earnings CAGR of 19% and 10% respectively. DLF is currently trading at FY09E, FY10E and FY11E P/E of 9.4x, 8.5x and 7.8x respectively, based on our EPS estimates of Rs51.1, Rs56.3 and Rs61.5 respectively. Going forward, we expect the companys EBITDA margin to shrink from 72% in FY07 and 68.5% in FY08 to 61% by FY11E. However, DLF will continue to retain healthy operating margins in the 61-64% range over the next three years. Such healthy profit margins are mainly due to the locked in low land cost (Rs315/sqft) and proportionately higher property prices. Also, as the fraction of lease income grows, the company would be able to maintain margins going forward. Margins are also positively impacted by project mix, which has a higher commercial component. Going forward, mid-housing revenues will kick in aggressively, leading to margin contraction. DLFs net profit margin will remain high, within the 44-50% range primarily due to lower tax rate on account of tax benefits for SEZs (~90% of DLF office space is demarked for SEZs) and rental income. We expect the companys RoE to decline from current levels and settle within the 2631% range. This decline is primarily due to decrease in asset turnover, despite strong profit margins, as more rental assets get added to the balance sheet. Also, returns on excess cash generated from current and upcoming projects may not get employed at the current high rate-of-return investments. However, within the core real estate development business, the company should be able to maintain more then 25% RoE over the next 10 years.
Why premium valuations

Visionary management
DLF has one of the best managements in the Indian real estate sector, consistently having created value for the company. DLF has a good brand reputation as a premium quality developer. Mr KP Singh, Chairman, has over 43 years of experience in the real estate industry. He has held various important industrial, financial and diplomatic positions, including Member of International Advisory Board of Directors of General Electric, Director of the Central Board of Reserve Bank of India etc. Mr KP Singh and the DLF management have been visionaries; significant credit to development at Gurgaon from a farmland to the corporate hub of North India can be attributed to the DLF management. DLFs history of successful execution and delivery lends credence to the companys ability to deliver on the mega plans envisaged.
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DLF, June 18, 2008
ICICI Securities
Established brand name in the local market
DLF is one the best known real-estate brands in India; the company has over 60 years of experience in real estate development. It has a well established marketing set-up of over 120 brokers. The companys properties command a premium of more than 10-20% as against similar projects by other developers. It has been credited with the development of Gurgaon; also, the DLF City Township (3,000 acres) is one of the hallmark projects in North India.
Constant ability to make NAV-accretive land acquisitions

DLF has demonstrated its ability to add further value via land bank acquisitions. The large size and contiguity of recent land acquisitions makes it NAV accretive. We believe that DLF would be able to leverage its strong financial position and experience to aggressively increase its land bank, leading to NAV upsides. Our current NAV calculation does not factor in any reinvestment of surplus cashflow to acquire a new land bank. Recent land acquisitions, post listing, are: In July 07, DLF won the bid for Dwarka International Convention Centre in Delhi for Rs9bn, with planned development value of Rs60bn. The company plans a 2.5mn sqft development, including the aforementioned convention centre, hotel, office complex and shopping mall. The project is estimated to be completed by 10. In Aug 07, DLF purchased Swatantra Bharat Mills in Delhi for Rs16.7bn with a planned development value of Rs70bn. Acquired multiple sites across South-India, including Begur and Rajapura (Bangalore) and Old Mahabalipuram Road (Chennai) DCM Shriram Land 38 acres of land was acquired by DLF in a prime area of Delhi in 07 for Rs16.7bn. Bidadi Township. DLF has plans to develop Bidadi integrated township, spread over 9,168 acres on the outskirts of Bangalore, with potential value creation of ~ Rs500bn
Cap rate compression

DLF could benefit significantly if cap rates start to compress in India or globally. Given the high-quality, prime locations, client relationship and the DLF brand strength, the companys properties stand a good chance for cap rate reduction. We estimate that 1% reduction in cap rate would lead to increase in DLFs NAV ~6.6%. In developed real estate markets such as the US, Singapore and Hong Kong, cap rates are within the 5-7% range, in line with respective regional G-Sec rates. Over the past two years, there has been a spread compression due to reduction in long-term risk premium attached to the property market, high liquidity and assumption of capital appreciation in real estate assets. Effective returns to investors in Indian property
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DLF, June 18, 2008
ICICI Securities
transactions have been higher than the US, Europe, Singapore and other developing Asian economies.
Superior execution capabilities

DLF has executed landmark, built-to-suit commercial projects in Gurgaon. The company has also been able to reduce project execution time by adopting newer technologies such as table-form shuttering for slabs and providing plug-and-play fitted offices, where required. The company is now diversifying into other parts of India and currently developing ~59mn sqft of property, implying execution ramp-up of over 5x in the past two years. The DLF-LOR JV and local contractors facilitate the company to execute development plans and deliver on a larger platform. The company has formed a wide array of partnerships with renowned names to access technical competencies. DLF has scaled up its construction JV with Laing ORourke to 16 projects, 1,600 people and 40mn sqft of construction, with an order book of ~Rs60bn, within a couple of years. The JV is already amongst the larger construction companies in the country.
Innovative ways to monetise assets

DLF intends to employ various methods to unlock value of its projects early via monetising its assets through REITs (Real Estate Investment Trusts), PE (private equity) placements, private investment trusts etc. DLFs promoters are looking at listing the DLF Office Trust (DOT) through a REIT-like structure on the Singapore Exchange; assets in DOT include commercial properties currently under construction sold by DLF to DLF Assets (DAL). Such a listing would help DLF sell further properties to DAL and free up capital for newer projects. The company is also looking for similar capital raising and monetisation of its retail and hotel assets going forward. In a recent transaction, DLF was able to monetise its residential projects as well via selling stakes in 8 middle-income residential projects to private equity investors for US$424mn. The company sold 49% in 7 housing projects to Merrill Lynch for Rs15bn or US$377mn. The projects are in the cities of Chennai, Bangalore, Kochi and Indore and likely to be completed in the next 7-8 years. The company has also sold 49% stake in another mid-income housing project at Panchkula, Haryana to Brahma Investments for Rs1.94bn; ~38mn sqft has been sold out to PE investors.
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DLF, June 18, 2008
ICICI Securities Risks

Execution risk
DLF plans to make available ~100mn sqft for sale or lease through FY08-11. We believe this is an optimistic target, given that the company has ~59mn sqft under construction at present. DLF has developed 25mn sqft (excluding plots) since its inception in 1946. To account for the delay in execution, we have assumed 6 months to a years delay in execution till FY11E, post which we have assumed 1-2 years delay. Also, the companys development plans also seem aggressive; we have discounted these plans by 5% compounded annually FY11E onwards. Further, DLF outsources its construction to its DLF-LOR JV and other construction companies. Given that there is significant construction backlog with most of these companies coupled with development plans of other real estate companies that would also be undertaken by these construction companies, it will be difficult for DLF to find constructors for its projects. However, its tie-up with LOR will help reduce dependence on other contractors. DLF could find it difficult to execute the Bidadi (Bangalore) project within the stipulated timeline. The company is planning to build its biggest residential project at the outskirts of Bangalore. The Bidadi Knowledge Park will be developed across 9,178 acres of Bidadi, which is 30km from Bangalore. The development is scheduled to be completed within a 5-year stringent timeline which, we believe, is very ambitious. Any delay in the timeline could result in penalties for DLF.
Absorption risk
At DLFs average construction run rate, absorption will be the deciding criteria. Even though the real estate market is currently showing good volumes and DLFs target segment is moving towards the larger mid-income category; we perceive that absorption risk will remain high, particularly in the residential segment as DLF expects to capture 20-30% of the overall residential market. Based on DLF's current market share of the Residential segment at ~9-11% and aggressive ramp-up plans of other developers, real estate market will find it difficult to absorb this supply. Within the Office and Retail segments too, DLF plans to deliver 15-20mn sqft annually; we believe that the property market will find it difficult to absorb such a supply. To account for absorption risk, we have assumed 20% drop in residential selling prices and 20% drop in rentals. Additionally, 1-year execution and 5% compounded annual delay in launch will help reduce supply.
Exposure to NCR
We estimate DLF to have ~40% of its total land bank in NCR; in value terms, the exposure could be ~50%. This would make DLF highly susceptible to any adverse developments in Gurgaon, Noida and Delhi. We see oversupply conditions in the Gurgaon market, which could impact the companys sales. Also, changes in land use regulations, zoning laws, taxes, natural calamity and any social or political development could depress real estate sentiment in NCR.
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DLF, June 18, 2008
ICICI Securities
However, a large component of sales in NCR is commercial & retail; this reduces downside risk as commercial properties could be sold to DAL and most retail projects are on long-term lease.
Cashflow concerns
DLF has significantly higher proportion of sundry creditors-to-sales on its balance sheet. For FY08, sundry debtors stood at 56% of sales at ~Rs79bn. This is due to outstanding to DAL (Rs19.4bn) and outstanding to Merrill Lynch (Rs5.4bn) as well as certain creditors outstanding on the companys power subsidiary. However, DLF also has creditors outstanding on percentage completion (PCOM) basis on its ongoing commercial, retail and residential projects. This is unlike other property developers and illustrates aggressive revenue booking by the company. We estimate sundry debtors to remain high going forward, within the 40-50% of sales; any spike in sundry creditors will be a key investment risk. Rising inflation cost will also increase input cost, particularly construction cost. In the current soft property market, DLF will find it difficult to pass on such costs to the end customer, further straining cashflow. Further, DLF is dependent on DAL for cashflows; in case of delay in cashflow from DAL, the company may not be able to mobilise funds for its projects, thus hindering growth. Sale to DAL may pose conflict of interest, given that both the companies belong to the same management. However, DLF has indicated that it will sell its commercial assets in open auction with DAL as one of the participants. We are concerned that DLF may not be able to realise market value of its properties. However, a strong balance sheet (post IPO) has helped mitigate this risk. Most projects are already under construction and expected to generate attractive cashflows over the coming years. Also, the D/E remains low, allowing DLF to take further debt, if required. Additionally, incremental cash outflow for land acquisition is low.
Landbank transfer incomplete by various State Governments

Transfer of key land banks is yet incomplete between DLF and various State Governments. Large parcels of DLFs land bank in Dankuni, West Bengal (2,500 acres) and Bidadi, Bangalore (9,500 acres) is outstanding. Additional delay in acquiring these land banks from State Governments presents risk to our valuations. Risk remains particularly high in the Dankuni landbank acquisition, which is taking a political overtone.
Other risks
Cyclicality. Real estate is a commodity business; oversupply and cyclicality are
inevitable, only the timing could vary. Although current trends do not validate a severe downturn in real estate market, however the slowdown in transactions (volumes) coupled with decline in selling prices, could dent DLFs earnings.
Macro factors. Key factors such as interest rate hike, reducing appetite of banks for
realty loans, deceleration in GDP growth rate, slower growth in disposable income and slowdown in services present a serious threat to the Realty sector.
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DLF, June 18, 2008
ICICI Securities
Regulatory & litigation risks. Changes in policies and regulation affecting realty sector will impact DLF. Realty sector is burdened with litigations; DLF has over 300 cases pending against itself as on November 30, 06. Litigations can occur in the future and impact profitability and development timelines.
Property market concerns and outlook

Key concerns for the property market are: i) affordability (prices, liquidity & interest rates), ii) oversupply (sagging demand & increasing supply), and rising input cost (increasing land, raw material and financing cost).
Affordability
Sharp increase in real estate prices coupled with high interest rates has constrained affordability in the residential segment. Broader economic deceleration led by various macro factors such as higher interest rates, rising input costs, exchange rate volatility and particularly deceleration of IT/ITES industry growth has put on hold the aggressive growth plans of corporate India, leading to slowdown in commercial office space. In the residential market, YoY growth in housing loan disbursement data (net growth in disbursement by banks; does not include housing finance companies-HFCs that have been gaining market share) has dropped to almost one-third from 33.4% in November 06 to 12% in February 08, indicating low appetite amongst retail buyers to purchase houses in the current environment. Chart 9: Growth in Net housing disbursement (Banks)
40 35 30 25 (%) 20 15 10 5 0 Nov-06 33.4 25.8 21.6 16.6 15.1 12
Feb-07
May-07
Aug-07
Nov-07
Feb-08
Source: Reserve Bank of India (RBI)
Over CY02-07, low interest rate coupled with affordable property prices led to 43% CAGR in disbursement. Average ticket size grew 2.5x for new urban houses. However, now, banks have become cautious about risk to home loans, as property prices as well as interest rates have increased significantly in the past year. Banks have also reduced the average LTV (loan-to-value) for new disbursements, resulting in further slowdown in demand for the current year.
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DLF, June 18, 2008 Chart 10: Affordability

3.5 Property value & Affordability (Rs mn) 3.0 2.5 2.0 1.5 1.0 0.5 0.0 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 Property cost Affordability
ICICI Securities
Annual Income (RHS) 0.7 0.6 Annual Income (Rs mn) 0.5 0.4 0.3 0.2 0.1 0.0 '07 '08
Source: HDFC
Consistently deteriorating affordability has affected demand in all cities equally, despite healthy salary growth. We expect affordability to improve as salaries in corporate India grow 12-15% YoY and due to base correction in property prices. The process would, however, be slow and lead to near-term pressure on prices. Similarly, on the office & retail space front, we expect affordability to improve as corporate India continues on the upward trajectory, though at a slower pace. On the Office front, affordability is dependent on corporate growth, near-term demandsupply mismatch and rentals as a component of business expenses. Though IT/ITES (accounts for 75% of office demand) has seen slowdown, the sector is still expected to grow 20-25% over the next five years, leading to steady demand for commercial space. Other key sectors such as financials, bio-tech etc generating office demand are also showing strong growth, albeit at a slower pace. However, further slowdown in the IT/ITES industry, driven by global factors, remains a key risk to our view.
Oversupply Current demand/supply scenario

We believe that demand and supply are balanced across India, although, going forward, supply would begin outstripping demand; however, we do not expect significant oversupply, in the Residential, Office or Retail segments, till end-CY09 (further tightening of interest rate could reduce demand, leading to lesser absorption of supply). Though inventory levels have increased sharply, we believe that shortage of funds, rising input costs and constraining execution capabilities will restrain supply. Also, developers would look to delay project plans and execution in a weak market. The current scenario warrants a 15-25% correction in prices; but, it does not credit a huge crash in the property market.
Residential
As per the National Housing Bank (NHB), there was a housing shortage of 19.4mn units (12.7mn units in rural areas and 6.7mn units in urban areas) in FY03. According to the X FYP (five year plan), estimated housing shortage was 22.7mn units by endCY07. Industry estimates suggest cumulative demand-supply gap at 4.1bn sqft.
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DLF, June 18, 2008
ICICI Securities
For the overall market, we estimate demand for residential units in urban India at ~2bn sqft/annum. Although it is difficult to estimate residential demand within the target segment of real estate developers, we estimate it to be 450-550mn sqft based on new housing demand created by rising middle & upper income households. Demand for the high-end residential segment (properties with ticket size of over Rs2.5mn) is 100130mn sqft. As per a recent AC Neilson report, supply from the high-end residential segment is ~120mn sqft, which implies the demand & supply situation to be comfortably matched; we do not expect the equilibrium to shift significantly.
Office segment
In the recent past, demand for office space was far exceeding supply in most locations across India, given the large number of pre-leases and low vacancy rates. However, supply is now matching and inching above demand. We estimate that the current supply pipeline would not lead to an oversupply in the near term; however, rentals may not move further, signalling an end to capital appreciation on office properties. The development of IT/ITES SEZs remains a key risk to our estimates (could create additional 33mn sqft supply annually). We estimate office space demand in India at 65mn sqft per annum, 75% of which would be from the IT/ITES sector. We believe that demand from the sector would be driven by addition of ~565,000 employees per annum over the next five years. We estimate office space supply in India at 50-55mn sqft in CY07. The cumulative development pipeline for the key 7 cities is ~105mn sqft. Table 13: Cumulative office supply across 7 key cities
(mn sqft) CY03 8 10 4 3 1 CY04 13 13 11 4 3
6 50
Bangalore Mumbai Chennai Pune Hyderabad Kolkata Delhi 5 Total 31 Source: JLLS, I-Sec Research
CY05 17 17 14 7 5 1 10 71
CY06 29 20 22 10 8 2 14 105
CY07 33 30 36 17 14 6 20 156
Supply in 07 4 10 14 7 6 4 6 51
Development pipeline 12 14 26 16 12 15 11 105
Retail segment
We estimate retail sector demand at 37mn sqft per annum; currently, there is high demand for quality retail space across India. We estimate supply to exceed demand in the next two years as many large projects would come onstream across most metros. We remain wary of the possible oversupply post CY09 that is likely to hit retail before it does the office and residential segments. The impact of oversupply would be more severe in Retail, given the high land & construction costs (input costs). The Indian retail market (~US$320bn in 06) is largely fragmented; organised retail accounts for just ~6% of the total market. In the Retail segment, high rentals as a percentage of sales are a cause for concern as they dilute viability for retailers.
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DLF, June 18, 2008 Table 14: Addition in retail space

Year FY06 FY07 FY08 Bangalore FY06 FY07 FY08 Chennai FY06 FY07 FY08 Pune FY06 FY07 FY08 Hyderabad FY06 FY07 FY08 Source: Industry, I-Sec Research City Mumbai Current Rental (Rs/sqft/mth) 300-100
ICICI Securities
Space addition (mn sqft) 4 10 4 1 2 3 1 2 3 1 4 1 1 2 6 Total Space (mn sqft) 14 21 26 3 5 8 2 4 6 5 8 9 2 4 10
200-100
90-60
80-110
90-60
Rising input costs

Input costs for the real estate sector have risen sharply. Construction costs have moved up Rs300-400/sqft primarily due to rising cost of steel, cement and other raw material. Additionally, land costs have inched upwards, though most large developers are land-banked for the next 7-10 years. High land cost has become detrimental for new land bank purchases. Furthermore, financing cost has gone up and banks are looking to reduce their exposure to real estate developers, increasing interest rate 300-400bps. Rising input costs have dented profitability of developers. The industry was running on high operating margins, ranging over 45-70%, depending on the cost of land. However, going forward, margins are expected to fall significantly as it will be difficult to pass rising input costs to end customers.
Outlook
Real estate market is facing tough operating conditions. We expect volumes to pick up, though margins may remain under pressure due to higher input costs & lower pass through to end customers. Channel checks suggest that prices have fallen 15-25% across various cities. In lieu of a price cut, many developers are offering freebies (free car parking, registration, lower interest rates on mortgages, vacation packages etc) on their ongoing projects. Affordability will improve with price correction, as fundamental drivers of the property market still remain intact. We do not see further sharp corrections from these levels, except some local markets where prices may correct due to oversupply. Given the significant capital appreciation in the past two years and higher operating margins enjoyed by developers (50-80%), drop in prices can be absorbed by the developers. Given the current supply scenario and recent hikes in interest rate, home buyers have adopted a wait-and-watch stance, implying that differentiated product offerings and brand name would play a critical role in closing a sale. Further, this would increase the possibility of a sporadic drop in prices in certain pockets. However, once the interest rates stabilise, improving demographics and the latent housing demand would again push up residential demand. We believe that as the property market matures in various Indian cities (i.e. no supply-side constraints for quality homes), developers with better business competencies/skills will differentiate themselves and move forward.
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DLF, June 18, 2008
ICICI Securities Profile

Founded in 1946, DLF is the largest real estate company in India on a completed projects basis, with developed properties of ~224mn sqft including 195mn sqft of plots, 19mn sqft of residential properties (such as villas and apartments), 8mn sqft of commercial properties and 2mn sqft of retail properties. DLF has earlier been associated with the development of Gurgaon; the 3,000-acre township in Gurgaon (DLF City) is one of the most prominent projects of the company. In over six decades since the DLF Group was formed, the brand has become almost synonymous with quality construction, timely completion and reliability. In 1980, DLF started acquiring land adjacent to the area controlled by the Delhi Development Authority (DDA) and developed it into the DLF Qutab Enclave (District Gurgaon), now known as DLF City. In 1991, DLF ventured into grade A commercial office space and completed its first commercial project DLF Centre, a commercial complex located in Delhis city centre, by 1992. In 01, DLF commenced development of air-conditioned mega malls and retail spaces and, in 02 it completed its first mall called the DLF City Centre with a 3-screen multiplex and total let-able area of 0.3mn sqft on the MehrauliGurgaon road. DLF City, an integrated township (phase I-V, including Cyber City), which includes residential, commercial and retail properties spread across 3,000 acres, is a landmark development in terms of sheer size, innovation (both in design and construction techniques), management of multiple projects and marketing of ~63mn sqft (including 38mn sqft of plot sales) space in a transparent, yet smooth manner. This singular achievement clearly sets the DLF Group apart and is a testimony to its superior credentials. In this context, the fact that an enterprise of this size has been created with minimal recourse to equity infusion and dilution underscores the astute financial skills of promoters. We believe that such a track record positions DLF on a strong footing in a business characterised by lumpy investment demands and gestation period of 2-3 years. DLF is involved across all business segments of real estate residential, commercial, retail, hotels, hospitals, townships, SEZs etc. The company has laid down ambitious plans for each segment for the next 10 years. DLF has the bandwidth to execute its plan with an employee strength of ~3,697 (with ~2,961 professionals). Mr KP Singh, 74, is the Chairman of the company. He is a graduate in science from Meerut College and has attended the Indian Military Academy (IMA) at Dehradun. Mr. Singh served in the Indian Army and has over 43 years of experience in the real estate industry. He has held several important industrial, financial and diplomatic positions including Member of the International Advisory Board of Directors of General Electric and, presently, he is an honorary Consul General to the Principality of Monaco. He is a Member of the Executive Committee of the Federation of Indian Chambers of Commerce & Industry. He was also the President of the Associated Chambers of Commerce & Industry of India (ASSOCHAM) in 1999.
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DLF, June 18, 2008
ICICI Securities
Mr Rajiv Singh is the Vice Chairman of the company. He is a graduate from Massachusetts Institute of Technology (MIT), USA and also holds a degree in mechanical engineering. Mr Rajiv Singh has over 25 years of professional experience. He directs the strategy and oversees operations of the companys residential, commercial, retail, infrastructure, hotels and SEZ business lines. In December 05, he was awarded the Udyog Ratna Award for valuable contributions to economic development of Haryana. Mr TC Goyal is the Managing Director of the company and the Chairman of DLF Retail Developers, DLF Estate Developers and DLF Home Developers. He has a degree in Commerce from Shri Ram College of Commerce, Delhi University. He is a Fellow Member of the Institute of Chartered Accountants of India. Mr Goyal has over 37 years of experience in finance and project counselling. Chart 11: DLF Organisation structure
DLF
Core Business
New Business
Execution Enablers
Investments
Homes
Office
Shopping
LOR JV
Prudential JV Funds
WSP JV
Hotels Funds Aman Resorts
Large SEZ Nakheel JV Other SEZ SPVs
Infrastructure
Chart 12: DLF Development over the years

Development of 21 urban colonies Ventured into Group Housing Projects Ventured into organised retail complexes Launched premium residential complexes with luxurious milieu of the Golf Links Significant progress in pursuing and ramping up new businesses hotels and large townships
1946
1950-64
1985
1996
1999
2002
2003
2004
2005
2006
2007
Founded by Chaudhary Raghuvendra Singh
Commenced development of 3,000 acres Gurgaon city
Ventured into Grade A office spaces in Gurgaon
Commenced development of DLF Cybercity in Gurgaon
Focus on IT Parks and nextgeneration malls
Formed JVs with Prudential for Life Insurance & AMC. Also entered capital markets
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DLF, June 18, 2008
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Shareholders settlement
DLF IPO was derailed in its first attempt as minority shareholders approached the Company Law Board and SEBI, alleging that DLFs management intentionally denied some investors to participate in the Rs350mn rights issue in September 05, which increased promoters stake to 99.5%. Later, an agreement was reached between the management and minority shareholders, wherein the latter were issued 81,983 shares or 2% of unsecured redeemable debentures of Rs100 each, which would be converted into equity shares in the ratio of 10 equity shares of Rs10 each. It would be further split into five shares of Rs2 each. Further, a bonus share issue of 7 equity shares of Rs2 each for every share of Rs2 held after the conversion of the debentures into equity shares and subsequent splitting of shares were also awarded to shareholders.
Listing details
DLF entered the capital markets on June 11, 07 with a public issue of 175,000,000 equity shares of Rs2 each via 100% book-building process. Price band was fixed at Rs500-550/share and was allotted at Rs525/share. The issue constituted 10.26% of the fully diluted post-issue capital of the company. At the issue price, the capital raised was Rs91.875bn (~US$2.25bn). DLF shares listed at Rs583 on listing. Of the net proceeds of the issue, the company planned to utilise Rs35bn for acquisition of land and development rights, Rs34.934bn for development and construction costs for existing projects and the remaining amount for prepayment of loans of the company.
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DLF, June 18, 2008
ICICI Securities Business segments

Residential
DLF has been enjoying strong brand loyalty across three generations of customers as a result of high-quality development, attractive appreciation in DLF property values, broad range of residential options and ability to provide innovative choice. The strong brand that DLF enjoys in its core markets is evidenced by its ability to command a premium on its properties, relative to competitors. The business unit of DLF Homes comprises diverse residential developments such as luxury group housing, row-houses/villas, integrated townships and plotted colonies. Historically, DLF has had a dominant position in NCR and is now in the process of expanding its geographic presence to other metros such as Bangalore, Chennai, Indore, Lucknow and Cochin. Currently, the home business unit enjoys presence in 17 Indian cities. DLF has developed ~224mn sqft of residential projects that include ~195mn sqft of plots and 19mn sqft of group housing societies, with the remaining distributed across commercial and retail properties. Most constructed properties have been within DLF City in Gurgaon. Also, the company has launched residential projects with a saleable area of ~7mn sqft. To sustain growth and strengthen its industry leadership position, DLF plans to develop 485mn sqft of residential space (85% in metros) over the next 10 years, the growth driven by the strengthening of its dominant position in the NCR, an expanding presence across 32 Indian cities and creating large residential townships. In a recent transaction, DLF was able to monetise its residential projects as well be sell stake in 8 middle-income residential projects to private equity investors for US$424mn. The company sold 49% in 7 housing projects to Merrill Lynch for Rs15bn or US$377mn. The projects are in the cities of Chennai, Bangalore, Kochi and Indore and likely to be completed in the next 7-8 years. The company has also sold 49% stake in another mid-income housing project at Panchkula, Haryana, to Brahma Investments for Rs1.94bn. The company has sold ~38mn sqft to PE investors. In Q3FY08, DLF launched its residential projects 15 acres New Town Heights, DLF Riverside, 53.5 acre Garden City in Chennai and 82 acre Garden City in Indore. DLF is planning to launch a few more residential projects in Kochi, Goa, New Gurgaon and Chandigarh in the coming quarters. We have highlighted the sales & construction schedule of the companys super-luxury, luxury and middle-income housing projects.
30
DLF, June 18, 2008 Chart 13: Mid-income development schedule

180 160 140 120 (mn sqft) 100 80 60 40 20 0 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 Development schedule New lanuches
ICICI Securities
Handed over
FY20
FY21 FY21
Chart 14: Luxury housing development schedule

18 16 14 12 (mn sqft) 10 8 6 4 2 0 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY22 FY17 Development schedule New lanuches Handed over
Chart 15: Super-luxury housing development schedule

2.5 2.0 1.5 1.0 0.5 0.0 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 Development schedule New lanuches Handed over
(mn sqft)
FY22
31
DLF, June 18, 2008 Chart 16: Construction schedule residential

70 60 50 (mn sqft) 40 30 20 10 0 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 Mid income Luxury
ICICI Securities
Super Luxury
FY20
FY21
Table 15: Mid-income housing Development schedule

Development schedule Super Metros Metros Tier I Tier II Grand Total New launches Super Metros Metros Tier I Tier II Grand Total FY09 0.5 5.6 4.8 2.4 13.3 FY10 6.0 10.0 11.2 3.1 30.3 FY11 13.5 15.1 13.7 2.7 45.0 FY12 24.4 22.5 14.5 1.8 63.1 FY13 32.6 31.6 16.2 1.9 82.3 FY14 40.1 45.1 20.2 2.6 108.0 FY15 52.0 63.9 24.9 3.6 144.3 FY16 51.4 75.8 22.9 4.1 154.1 FY17 47.2 84.0 18.4 4.0 153.6 FY18 36.3 79.6 12.2 3.0 131.1 FY19 20.9 57.9 6.2 1.7 86.7 FY20 9.9 30.4 2.6 0.7 43.6 FY21 3.1 10.0 0.7 0.2 14.0 FY22 0.3 0.0 0.1 0.0 0.4
0.5 6.7 4.8 2.4 14.3
5.7 8.0 7.9 1.5 23.0
9.3 11.7 6.3 0.7 28.0
15.6 16.0 6.9 0.7 39.2
16.4 19.1 8.1 1.0 44.7
17.6 25.1 9.6 1.4 53.6
22.6 31.6 10.0 1.6 65.8
17.0 33.6 6.3 1.6 58.5
13.9 34.2 4.0 1.3 53.4
7.1 25.8 1.7 0.5 35.1
1.0 9.8 0.2 0.0 10.9
0.0 0.0 0.0 0.0 0.0
FY22
0.0 0.0 0.0 0.0 0.0
0.0 0.0 0.0 0.0 0.0
0.2 3.6 1.4 0.7 5.9
1.9 6.6 3.8 1.2 13.4
4.7 8.6 6.1 1.6 21.0
8.2 9.9 6.4 0.9 25.4
10.1 11.7 5.5 0.6 28.0
10.7 12.8 5.3 0.7 29.5
17.6 21.7 8.4 1.1 48.8
18.1 26.0 8.5 1.3 53.9
18.0 30.3 7.9 1.5 57.6
16.3 31.5 6.2 1.3 55.4
11.0 27.4 3.6 1.0 43.0
6.8 20.4 1.9 0.6 29.7
2.7 11.5 0.7 0.2 15.0
Table 16: Mid-income housing Construction schedule

Table 17: Mid-income housing Sales schedule

32
DLF, June 18, 2008 Table 18: Luxury housing Development schedule
FY09 Development schedule Super Metros Metros Tier I Tier II Grand Total New launches Super Metros Metros Tier I Tier II Grand Total
6.5 0.0 0.0 0.3 6.7
ICICI Securities
FY10
4.7 0.0 0.2 0.4 5.3
FY11
6.0 0.0 0.4 0.2 6.6
FY12
6.1 0.0 0.3 0.1 6.5
FY13
7.1 0.6 0.2 0.0 7.9
FY14
8.1 1.4 0.2 0.0 9.8
FY15
12.6 2.1 0.5 0.0 15.2
FY16
12.2 2.5 0.7 0.0 15.3
FY17
10.5 2.9 0.5 0.0 13.9
FY18
8.9 3.5 0.3 0.0 12.7
FY19
4.7 2.3 0.1 0.0 7.2
FY20
2.4 1.4 0.0 0.0 3.7
FY21
0.9 0.5 0.0 0.0 1.4
FY22
0.0 0.0 0.0 0.0 0.0
3.2 0.0 0.0 0.3 3.4
2.5 0.0 0.2 0.2 2.9
3.0 0.0 0.3 0.0 3.2
3.0 0.0 0.0 0.0 3.0
3.5 0.6 0.1 0.0 4.2
3.5 0.9 0.1 0.0 4.6
6.7 0.9 0.3 0.0 7.9
3.5 0.9 0.3 0.0 4.8
2.5 1.3 0.0 0.0 3.7
2.5 1.6 0.0 0.0 4.1
0.0 0.0 0.0 0.0 0.0
0.0 0.0 0.0 0.0 0.0
0.0 0.0 0.0 0.0 0.0
0.0 0.0 0.0 0.0 0.0
4.3 0.0 0.0 0.1 4.3
1.7 0.0 0.1 0.1 1.9
2.9 0.0 0.1 0.2 3.2
2.5 0.0 0.2 0.1 2.7
2.5 0.1 0.1 0.0 2.7
2.1 0.3 0.1 0.0 2.5
4.0 0.5 0.1 0.0 4.6
4.1 0.8 0.2 0.0 5.2
4.1 1.0 0.2 0.0 5.3
4.2 1.1 0.2 0.0 5.5
2.3 1.0 0.1 0.0 3.4
1.5 0.8 0.0 0.0 2.3
0.9 0.5 0.0 0.0 1.4
Table 19: Luxury housing Construction schedule

FY09 FY10 Super Metros 4.3 1.7 Metros Tier I 0.1 Tier II 0.1 0.1 Grand Total 4.3 1.9 Source: Company data, I-Sec Research FY11 2.9 0.1 0.2 3.2 FY12 2.5 0.2 0.1 2.7 FY13 2.5 0.1 0.1 2.7 FY14 2.1 0.3 0.1 2.5 FY15 4.0 0.5 0.1 4.6 FY16 4.1 0.8 0.2 5.2 FY17 4.1 1.0 0.2 5.3 FY18 4.2 1.1 0.2 5.5 FY19 2.3 1.0 0.1 3.4 FY20 1.5 0.8 2.3 FY21 0.9 0.5 1.4 FY22 -
Table 20: Luxury housing Sales schedule

FY09 FY10 Super Metros 4.9 1.4 Metros Tier I 0.1 Tier II 0.1 0.1 Grand Total 5.0 1.6 Source: Company data, I-Sec Research FY11 3.0 0.1 0.2 3.2 FY12 2.6 0.2 0.1 2.9 FY13 2.8 0.1 0.2 3.1 FY14 2.0 0.3 0.1 2.4 FY15 3.9 0.5 0.1 4.6 FY16 4.1 0.8 0.2 5.1 FY17 3.9 1.0 0.2 5.1 FY18 4.4 1.1 0.2 5.7 FY19 2.4 0.9 0.1 3.5 FY20 1.5 0.8 2.3 FY21 1.0 0.6 1.6 FY22 -
Table 21: Super Luxury housing Development schedule

0.6 0.0 0.0 0.0 0.6
FY10
1.4 0.0 0.0 0.0 1.4
FY11
1.7 0.0 0.0 0.0 1.7
FY12
2.1 0.0 0.0 0.0 2.1
FY13
2.0 0.0 0.0 0.0 2.0
FY14
1.3 0.0 0.0 0.0 1.3
FY15
0.9 0.0 0.0 0.0 0.9
FY16
0.3 0.0 0.0 0.0 0.3
FY17
0.0 0.0 0.0 0.0 0.0
0.6 0.0 0.0 0.0 0.6
1.0 0.0 0.0 0.0 1.0
0.7 0.0 0.0 0.0 0.7
1.2 0.0 0.0 0.0 1.2
0.8 0.0 0.0 0.0 0.8
0.0 0.0 0.0 0.0 0.0
0.0 0.0 0.0 0.0 0.0
0.0 0.0 0.0 0.0 0.0
0.0 0.0 0.0 0.0 0.0
0.2 0.0 0.0 0.0 0.2
0.5 0.0 0.0 0.0 0.5
0.8 0.0 0.0 0.0 0.8
0.9 0.0 0.0 0.0 0.9
0.7 0.0 0.0 0.0 0.7
0.5 0.0 0.0 0.0 0.5
0.6 0.0 0.0 0.0 0.6
0.3 0.0 0.0 0.0 0.3
33
DLF, June 18, 2008 Table 22: Super Luxury housing Construction schedule
FY09 Super Metros 0.2 Metros Tier I Tier II Grand Total 0.2 Source: Company data, I-Sec Research FY10 0.5 0.5 FY11 0.8 0.8 FY12 0.9 0.9
ICICI Securities
FY13 0.7 0.7 FY14 0.5 0.5 FY15 0.6 0.6 FY16 0.3 0.3
Table 23: Super Luxury housing Sales schedule

FY09 Super Metros 0.1 Metros Tier I Tier II Grand Total 0.1 Source: Company data, I-Sec Research FY10 0.4 0.4 FY11 0.7 0.7 FY12 0.9 0.9 FY13 0.8 0.8 FY14 0.4 0.4 FY15 0.6 0.6 FY16 0.3 0.3
Office
Leader in Commercial segment
DLF boasts of a strong position in the commercial segment, with established landmark developments in Gurgaon, Kolkata etc. The commercial segment has higher margins and less competition as it is more capital intensive; large developments usually work on a lease model and require long-term relationships with corporates. Also, posttransaction, facilities management services need to be provided. DLF leased 2.27mn sqft and sold 4.48mn sqft in the commercial segment in H1FY08. We believe that DLFs leadership position in the segment will make it the largest beneficiary of potential compression in cap rates. Further, DLF avails tax breaks on its commercial development as most of it falls within SEZ development, which enhances profitability. Currently, DLF has ~8mn sqft under lease. DLF is the pioneer of Grade A office leasing market in India. Its Offices business develops commercial space across various formats such as large IT/ITES facilities, multi-tenant corporate office buildings, built-to-suit properties and integrated commercial complexes. Besides strong presence in NCR, DLF's projects are spread across Mumbai, Kolkata, Hyderabad, Pune, Chennai and Bangalore. This business unit of the company presently enjoys presence in 16 Indian cities. In the coming quarters, DLF has planned launches of office spaces in Ludhiana, Hyderabad, Kolkata and Lucknow. DLF is known for its innovation, quality, commitment and timely delivery. It has a timetested clientele comprising some of India's biggest corporate names. It has a strong network of contractors and suppliers as well as enduring relationships with international property consultants such as Jones Lang LaSalle, Cushman & Wakefield, CB Richard Ellis and Colliers Jardine. DLF is developing a number of commercial projects across India with total ~40mn sqft of let-able commercial space, including 11 IT-SEZ projects (5 notified, of which 3 are occupied and operational and 6 have final approvals). DLF has achieved steady state to deliver 12mn sqft of office space on an annual basis. Work is ongoing on 40mn sqft of saleable area and the company expects to deliver 12mn sqft in FY09.
34
DLF, June 18, 2008
ICICI Securities
DLF expects to retain its leadership position in the commercial segment by targeting development of IT and non-IT commercial space over the next 10 years. It is now a dominant pan-Indian player, servicing prime customers across the country. Threats for the Offices business comprise slowdown in the IT/ITES and corporate sectors. While outlook on these sectors is robust for the next five years, the business unit is addressing the concern through accelerated delivery and diversification to newer tier II centres of demand. DLF is currently constructing a number of commercial projects across the country. These projects are expected to result in ~40 mn sqft of lease-able commercial space. Office space accounts for 44% of the companys NAV. While we have assumed a capitalisation rate of 10% for these projects, the IT-SEZ segment could see lower rates as the buyer will enjoy tax benefits.
Convention centres across India

DLF is in the process of setting up 5 convention centres at Delhi, Goa, Jaipur, Kolkata and Chandigarh tat would make it the largest convention-centre operator in India. The company won the bid for Dwarka (in New Delhi) convention centre (~US$1.5 bn) in July 07 and expects to set up four more such centres across India (Goa, Jaipur, Kolkata and Chandigarh). The convention & exhibition centre at Dwarka, set to be the largest in India, would come up near the airport over 2.5mn sqft and is likely to be completed by 10. Chart 17: Office Development pipeline
45 40 35 30 (mn sqft) 25 20 15 10 5 0 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 Development schedule New launches Handed over
35
DLF, June 18, 2008 Chart 18: Office Cumulative lease-able area
120 100 80 (mn sqft) 60 40 20 0 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
ICICI Securities
FY20
FY21 FY20
FY19 17.4 0.0 12.2 8.8 84.2 4.4
Chart 19: Construction schedule

20 18 16 14 (mn sqft) 12 10 8 6 4 2 0 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY21
FY20 8.6 0.0 8.8 5.4 90.3 2.7
Table 24: Commercial Segment Development schedule

Development schedule New launches Handed over Construction schedule Lease schedule Sales added Source: I-Sec Research
FY09 35.8 11.9 12.0 14.3 13.1 6.53
FY10 33.8 12.4 14.3 18.0 20.5 7.0
FY11 27.4 11.5 18.0 12.0 30.5 8.0
FY12 31.5 16.1 12.0 12.9 35.8 6.4
FY13 37.1 18.5 12.9 12.7 42.3 6.3
FY14 38.3 13.8 12.7 10.5 49.8 5.2
FY15 42.6 14.8 10.5 16.0 52.3 8.0
FY16 40.1 13.5 16.0 15.6 60.4 7.8
FY17 33.4 8.9 15.6 13.0 69.5 6.5
FY18 29.6 9.2 13.0 12.2 76.5 6.1
FY22
FY21 3.2 0.0 5.4 3.2 94.1 1.6
FY22 0.0 0.0 3.2 0.0 97.3 0.0
36
DLF, June 18, 2008 Table 25: Office segment Development schedule
15.6 8.1 10.4 1.7 35.8
ICICI Securities
FY10
14.5 6.7 9.6 3.0 33.8
FY11
11.7 4.8 7.4 3.5 27.4
FY12
12.7 9.4 6.9 2.5 31.5
FY13
15.2 13.6 7.1 1.2 37.1
FY14
16.6 16.8 4.4 0.4 38.3
FY15
18.2 21.1 3.0 0.3 42.6
FY16
16.5 22.5 1.1 0.0 40.1
FY17
9.8 23.6 0.0 0.0 33.4
FY18
5.0 24.6 0.0 0.0 29.6
FY19
1.7 15.7 0.0 0.0 17.4
FY20
0.0 8.6 0.0 0.0 8.6
FY21
0.0 3.2 0.0 0.0 3.2
FY22
0.0 0.0 0.0 0.0 0.0
3.8 2.7 3.8 1.7 11.9
5.6 1.8 3.3 1.7 12.4
5.3 2.0 2.9 1.3 11.5
5.7 6.8 3.0 0.6 16.1
8.0 7.1 3.3 0.1 18.5
6.8 7.1 0.0 0.0 13.8
6.0 8.8 0.0 0.0 14.8
4.8 8.7 0.0 0.0 13.5
0.0 8.9 0.0 0.0 8.9
0.0 9.2 0.0 0.0 9.2
0.0 0.0 0.0 0.0 0.0
0.0 0.0 0.0 0.0 0.0
0.0 0.0 0.0 0.0 0.0
0.0 0.0 0.0 0.0 0.0
Handed over Super Metros 5.9 6.7 Metros 2.7 3.3 Tier I 3.3 4.0 Tier II 0.0 0.3 Grand Total 12.0 14.3 Source: Company data, I-Sec Research
8.2 3.9 5.1 0.8 18.0
4.6 2.3 3.5 1.6 12.0
5.5 2.9 3.1 1.4 12.9
5.4 3.8 2.7 0.8 12.7
4.4 4.5 1.4 0.2 10.5
6.5 7.3 1.9 0.2 16.0
6.7 7.8 1.2 0.0 15.6
4.8 8.2 0.0 0.0 13.0
3.3 8.9 0.0 0.0 12.2
1.7 7.1 0.0 0.0 8.8
0.0 5.4 0.0 0.0 5.4
0.0 3.2 0.0 0.0 3.2
Table 26: Office segment Construction schedule

FY09 FY10 Super Metros 6.7 8.2 Metros 3.3 3.9 Tier I 4.0 5.1 Tier II 0.3 0.8 Grand Total 14.3 18.0 Source: Company data, I-Sec Research FY11 4.6 2.3 3.5 1.6 12.0 FY12 5.5 2.9 3.1 1.4 12.9 FY13 5.4 3.8 2.7 0.8 12.7 FY14 4.4 4.5 1.4 0.2 10.5 FY15 6.5 7.3 1.9 0.2 16.0 FY16 6.7 7.8 1.2 0.0 15.6 FY17 4.8 8.2 0.0 0.0 13.0 FY18 3.3 8.9 0.0 0.0 12.2 FY19 1.7 7.1 0.0 0.0 8.8 FY20 0.0 5.4 0.0 0.0 5.4 FY21 0.0 3.2 0.0 0.0 3.2 FY22 0.0 0.0 0.0 0.0 0.0
Table 27: Office segment Lease schedule (cumulative)

FY09 FY10 Super Metros 9.3 12.9 Metros 2.3 4.1 Tier I 1.5 3.6 Tier II 0.0 0.0 Grand Total 13.1 20.5 Source: Company data, I-Sec Research FY11 17.8 6.4 6.4 0.1 30.5 FY12 19.6 7.2 8.3 0.7 35.8 FY13 22.5 8.2 10.0 1.7 42.3 FY14 25.6 9.7 12.0 2.4 49.8 FY15 26.8 10.6 12.5 2.4 52.3 FY16 30.0 14.0 13.8 2.6 60.4 FY17 34.2 17.7 14.9 2.7 69.5 FY18 37.4 21.5 14.9 2.7 76.5 FY19 39.8 26.8 14.9 2.7 84.2 FY20 41.5 31.2 14.9 2.7 90.3 FY21 41.5 35.0 14.9 2.7 94.1 FY22 41.5 38.2 14.9 2.7 97.3
Table 28: Office segment Sales schedule

FY09 FY10 Super Metros 3.1 3.1 Metros 1.4 1.5 Tier I 1.8 2.0 Tier II 0.2 0.4 Grand Total 6.5 7.0 Source: Company data, I-Sec Research FY11 3.3 1.6 2.3 0.8 8.0 FY12 2.8 1.4 1.6 0.7 6.4 FY13 2.7 1.9 1.4 0.4 6.3 FY14 2.2 2.3 0.7 0.1 5.2 FY15 3.3 3.7 0.9 0.1 8.0 FY16 3.3 3.9 0.6 0.0 7.8 FY17 2.4 4.1 6.5 FY18 1.7 4.4 6.1 FY19 0.8 3.6 4.4 FY20 2.7 2.7 FY21 1.6 1.6 FY22 0.0
37
DLF, June 18, 2008
ICICI Securities
DLF Assets (DAL)
DLF Assets (DAL) is an asset holding company owned by the promoters of DLF. DAL is the primary buyer of property constructed by DLF. As per DLF, sales to DAL are at arms length and at market prices, duly approved by an audit committee. The company is looking at the possibility of sales of such projects via competitive bidding process. The DLF Groups subsidiary, DLF Assets, has plans to get converted into a REIT, which would utilize money from investors to purchase and manage properties. Majority of the income generated by REITs is shared among investors. India has not yet introduced legislation to support REITs. DAL needs to urgently get a proposed listing underway as a REIT in Singapore to pay DLF. DE Shaw and New opportunities I PCC (fund sponsored by the investment banking firm, Lehman Brothers), have invested US$400mn and US$200mn respectively. In a recent transaction, DAL received US$450mn from a London-based investment firm, Symphony Capital. Notably, as per earlier plans, DLF had a Put option at a guaranteed minimum cap rate. However, now, DLF will not enjoy any such option. Also, DAL will neither have any exclusivity nor any right of first refusal for any property developed by DLF. Chart 20: DAL to be a major buyer of DLF properties
Sell assets
DLF Limited
Pay sale price
DLF Assets Limited
Act primarily as a development company
Asset holding company, enjoying leasing income
Till date, DLF Assets has only bought property assets from the DLF Group. The company would soon start buying large block of properties in India from other parties. In FY08, DLF sold Rs53.5bn worth of assets to DAL, contributing 40% to DLFs cumulative PBT. Impact on PAT is even higher, given that the transferred projects are SEZs, implying no tax. Last year, DLF sold Rs8.8bn worth of assets to DAL, contributing 61% to its FY07 PBT. DAL has Rs19bn outstanding to DLF as on date. We expect further sales to continue to DAL in the coming years that would help DLF tide over short-term cashflow requirements.
38
DLF, June 18, 2008
ICICI Securities
Retail
DLF's retail business consists of high-street shopping, malls, super-luxury malls and destination malls, combining the best in retail and entertainment. The company reported comprehensive mall development with an extension into multiplex cinemas (DT Cinemas), resulting in a distinctive package comprising a superior shopping experience with quality ambience, parking, safety, security and entertainment. Besides NCR, projects are located in cities such as Mumbai, Kolkata, Hyderabad, Pune, Chennai and Bangalore. Currently, the business unit has presence in 26 cities. DLF has plans for delivering 1mn sqft of luxury malls, 4mn sqft of shopping malls and 3mn sqft of neighbourhood malls annually. The company has 12mn sqft of mall space under construction. In shopping malls, DLF's competitive advantage comes from world-class planning and design, specialised mall management, right product and amenity mix, leisure destinations in strategic locations and premium anchor clients. To keep up with economic growth and the fact that India is becoming a magnet for global retailers, DLF plans to roll out ~95mn sqft of malls in 5 formats through the following initiatives: Focusing on rapid growth of prime downtown shopping districts, neighbourhood centres and shopping centres Building strong brand equity for its super-luxury malls Launching a few pilot destination malls, investing ahead of the curve Focusing on destination malls, with scale and timing depending on market demand Sustaining launch of other formats, including different mall formats and shopping centres
Concerns in the Mall business comprise lack of clarity in the policy as regards organised retail at the central and state levels, lack of uniformity in taxation for indirect and property taxes and lack of transportation infrastructure to the malls. The Government policy is to simplify and rationalise taxes for retailers and property owners. We expect that, with implementation of a national VAT system accompanied by roll out of Central Governments recommendations on indirect taxes for the real estate sector, policy issues will be resolved. To address infrastructure needs around malls, DLF is working closely with local authorities on traffic planning and partnering in additional infrastructure creation.
39
DLF, June 18, 2008 Chart 21: Development schedule

30 25 20 (mn sqft) 15 10 5 0 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 Development schedule New lanuches
ICICI Securities
Handed over
FY20
FY21 FY21 FY21
Chart 22: Construction schedule

14 12 10 (mn sqft) 8 6 4 2 0 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY22 FY22
Chart 23: Lease schedule

60 50 40 (mn sqft) 30 20 10 0 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
40
FY22
DLF, June 18, 2008 Table 29: Retail segment Development schedule
(mn sqft)
Development schedule New launches Handed over Construction schedule Lease schedule Source: I-Sec Research
ICICI Securities
FY09 16.8 7.8 2.3 4.3 3.2
FY10 22.3 9.8 4.3 8.0 5.3
FY11 24.5 10.2 8.0 8.4 9.3
FY12 27.0 10.9 8.4 11.1 13.5
FY13 26.8 10.9 11.1 11.5 19.1
FY14 25.8 10.5 11.5 7.0 24.8
FY15 28.4 9.6 7.0 10.6 28.3
FY16 26.0 8.1 10.6 10.0 33.6
FY17 19.9 3.9 10.0 8.5 38.6
FY18 12.2 0.8 8.5 6.4 42.9
FY19 5.9 0.0 6.4 4.0 46.1
FY20 1.9 0.0 4.0 1.6 48.0
FY21 0.3 0.0 1.6 0.3 48.8
FY22 0.0 0.0 0.3 0.0 49.0
Hotels
DLF will invest sizeable capital in the Hotel and SEZ segments going forward, which will lead to further NAV expansion. We will get more clarity on this segment by the next few quarters. In our NAV, we have not assigned any value to SEZs and minimal value to the Hotel segment. With core businesses reaching stable operating performance, the company is aggressively focusing on ramping up new businesses such as hotels, infrastructure, SEZs etc. DLF plans to have 20,000-25,000 hotel rooms in luxury and business segments across India, which would make its hotel foray one of the largest in the country. DLF has ~51 hotel sites acquired for development across India. For its JV with Hilton, targeted towards the business segment, the company has finalised 18 hotel sites with 6,800 rooms and construction is expected to commence shortly. DLFs first hotel, Hilton Garden Inn is set to open in Sanket, New Delhi by Q3FY08. DLF has also signed a letter of intent with Four Seasons for a 230-room first superluxury hotel in Gurgaon. Further, for 36 hotel sites with 12,000 rooms, DLF is in the process of evaluating the category and positioning to ascertain right branding and product mix. DLF Hotels was formed to enhance focus and value to DLF's core real estate business. DLF Hotels aims to develop, acquire, finance and actively manage a rapidly growing hospitality portfolio, focusing on premium segment hotels, resorts, serviced apartments, convention centres and family recreational clubs. DLF Hotels is also developing a distinctive portfolio of luxury hotels, built and managed by some of the world's leading luxury branded hotels. Through a significant JV with Hilton Hotels Corporation, DLF Hotels is developing one of the leading chains of business hotels and serviced apartments through India. DLF Hotels is aggressively building its landbank and has already acquired sites in several cities, including Delhi, NCR, Cochin, Hyderabad, Mysore, Bhubaneswar, Chennai, Bangalore, Gangtok and Kolkata, giving the company pan-India presence. Further, DLF Hotels will develop, own, brand and manage a chain of 40-50 recreational clubs across India. Five club sites are already under various stages of development in DLF City. Also, nine sites are earmarked In Bangalore, Chennai, Chandigarh, Indore and Lucknow for developing recreational clubs.
41
DLF, June 18, 2008
ICICI Securities
With ~5,000 luxury hotel and 20,000 business hotel rooms under current development in major cities and tourist destinations in India, DLF Hotels is on track to create a portfolio of 25,000 rooms in the next 5-7 years. Some specific measures undertaken include tying up with international players, partnering with state governments to develop tourist destinations, executing projects under the Hilton JV and developing city clubs within DLF residential townships. In a growing and underserved economy such as India, lack of tourism and travel infrastructure presents the biggest threat. We believe that Government's thrust on airports, roads and other supporting facilities will contain the situation and improve the country's ability to support large numbers of tourists and business travellers. Table 30: Hotel segment Development schedule
(mn sqft)
Development schedule New launches handed over Construction schedule Lease schedule Source: I-Sec Research
FY09 6.2 6.2 0.0 0.6 0.0
FY10 13.8 7.6 0.0 2.0 0.0
FY11 16.0 2.8 0.6 6.1 0.6
FY12 14.0 0.0 2.0 5.9 2.6
FY13 7.8 0.0 6.1 1.9 8.8
FY14 1.9 0.0 5.9 0.0 14.7
FY15 0.0 0.0 1.9 0.0 16.6
FY16 0.0 0.0 0.0 0.0 16.6
Chart 24: Hotel segment Development schedule

18 16 14 12 (mn sqft) 10 8 6 4 2 0 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 Development schedule New lanuches Handed over
42
DLF, June 18, 2008 Chart 25: Hotel segment Lease schedule
18 16 14 12 (mn sqft) 10 8 6 4 2 0 FY11
ICICI Securities
FY12
FY13
FY14
FY15
FY16
Chart 26: Hotel segment Construction schedule

7 6 5 (mn sqft) 4 3 2 1 0 FY09
FY10
FY11
FY12
FY13
Table 31: Hotel segment Development schedule

2.3 1.1 2.0 0.8 6.2
FY10
5.0 3.0 3.7 2.1 13.8
FY11
6.8 3.5 3.7 2.0 16.0
FY12
6.0 3.1 3.1 1.7 14.0
FY13
3.7 1.9 1.3 0.9 7.8
FY14
1.4 0.4 0.1 0.0 1.9
FY15
0.0 0.0 0.0 0.0 0.0
2.3 1.1 2.0 0.8 6.2
2.8 1.9 1.7 1.3 7.6
2.0 0.6 0.2 0.0 2.8
0.0 0.0 0.0 0.0 0.0
0.0 0.0 0.0 0.0 0.0
0.0 0.0 0.0 0.0 0.0
0.0 0.0 0.0 0.0 0.0
0.0 0.0 0.0 0.0 0.0
0.2 0.1 0.2 0.1 0.6
0.7 0.4 0.6 0.3 2.0
2.3 1.2 1.8 0.8 6.1
2.3 1.4 1.2 0.9 5.9
1.4 0.4 0.1 0.0 1.9
43
DLF, June 18, 2008 Table 32: Hotel segment Construction schedule
FY09 Super Metros 0.2 Metros 0.1 Tier I 0.2 Tier II 0.1 Grand Total 0.6 Source: Company data, I-Sec Research FY10 0.7 0.4 0.6 0.3 2.0 FY11 2.3 1.2 1.8 0.8 6.1 FY12 2.3 1.4 1.2 0.9 5.9
ICICI Securities
FY13 1.4 0.4 0.1 1.9 FY14 0.0 FY15 0.0
Table 33: Hotel segment Lease schedule

FY09 Super Metros 0.0 Metros 0.0 Tier I 0.0 Tier II 0.0 Grand Total 0.0 Source: Company data, I-Sec Research FY10 0.0 0.0 0.0 0.0 0.0 FY11 0.2 0.1 0.2 0.1 0.6 FY12 1.0 0.5 0.8 0.4 2.6 FY13 3.3 1.8 2.5 1.2 8.8 FY14 5.6 3.2 3.7 2.1 14.7 FY15 7.0 3.6 3.9 2.1 16.6
Acquisition of Aman Resorts

DLF, along with Adrian Zecha, has picked up stake of over 50% in Aman Resorts. DLF and Adrian Zecha will jointly own 100% of Aman Resorts. The deal has been valued at US$400mn (including US$150mn in debt) and DLF would pay US$125mn for the 50% stake in the hotel chain. Aman Resorts owns and manages 22 luxury resorts in 12 countries, with 650 rooms and 172 villas. It is also constructing property, comprising 493 keys and 186 villas. Five of the properties will be completed in 08 and one by 09. Management estimates the average rental rate to be US$1,000/day for rooms and US$1,500/day for villas. Occupancy rate is 60-70% for rooms and 50% for villas. Amans CY07 revenue and EBITDA stood at US$120mn and US$27mn respectively. Aman is recognised as one of the pre-eminent luxury hotel groups in the world for its ability to create unique resort destinations. It positions itself as a lifestyle alternative vis--vis a boarding & lodging product providing the affluent leisure traveller with superior service in luxurious surroundings. Consistently superior facilities and service are believed to have enabled Aman to realise one of the highest average daily rates in the lodging industry (US$778 in 06). 34% of Aman patrons originate from Europe, another 34% from Asia-Pacific, 28% from Americas and 4% from rest of the world (RoW). Aman Resorts is developing projects in key gateway cities around the world, the first of which is scheduled to open in New Delhi, India in 08. This augurs well for DLFs strategy of expanding presence in the hotel industry. Acquisition of Aman Resorts will help the company enter the luxury segment of the hotel industry. The company has also tied up with Hilton Hotels for business category hotels. Tie-up with Aman Resorts and Hilton will aid DLFs entry in each segment of the hotel industry.
44
DLF, June 18, 2008
ICICI Securities
SEZs
DLF will invest sizeable capital in SEZ going forward, which will lead to further NAV expansion. In our NAV, we have not assigned any value to SEZs and await further clarity in the coming quarters. With core businesses reaching stable operating performance, the company aggressively focuses on ramping up new businesses such as hotels, infrastructure, SEZs etc. DLF has signed a 50:50 JV with Nakheel Llc, a leading real estate developer in the UAE, to develop large real estate projects in India. The management has already initiated land acquisition for the initial two projects (20,000 acres each in Gurgaon and Goa). DLF has received notification for its five IT SEZs (Chennai, Hyderabad, Mumbai etc.) and is awaiting notification for another six SEZs. Further, it is developing four multi-product SEZs, one each in Amritsar, Ludhiana, Gurgaon, and Ambala, which are at various stages of approval. The smaller IT/ITES SEZs are included in office segment. DLF is developing commercial projects across India, including 11 IT-SEZ projects (5 notified, of which 3 are occupied and operational and 6 have final approvals). DLF has achieved a steady state to deliver 12mn sqft of office space on an annual basis. Work is ongoing on 40mn sqft of saleable area and the company expects to deliver 12mn sqft in FY09.
Table 34: Current SEZ status

Projects (IT/ITES) Chennai IT Park Silokera IT Park Hyderabad Gachibowli IT Park W Block Cyber City Pune IT Park Kolkata IT Park Siel IT Park Bhubaneswar Nagpur IT Park Sonepat IT Park Gandhinagar IT Park Gurgaon Noida Hyderabad Chennai Total Source: I-Sec Research City Chennai Gurgaon Hyderabad Gurgaon Pune Kolkata Delhi Bhubaneswar Nagpur-Mihan Rai (Sonepat) Gandhinagar Gurgaon NOIDA Hyderabad Chennai Area (in mn sqft) 7.03 5.18 4.5 5.31 4.86 3.4 3.61 1.54 4 3.14 2.5 7.5 5 3 3 63.57 BOA Approval/Notification Notified Notified Notified Notified Notified Final Approval Final Approval Final Approval Final Approval Final Approval Final Approval Applied for Applied for Applied for Applied for Status Occupied, Operational & Under Construction Partially Leased & Under Construction Occupied, Operational & Under Construction Occupied, Operational & Under Construction Partially Leased & Under Construction Under Construction Under Construction Concept design & approvals in process Drawings under approval Under Construction Under Construction Application under Process Application under Process Application under Process Application under Process
45
DLF, June 18, 2008
ICICI Securities
Township
DLF's expertise in township and city planning, core real estate businesses and initiatives in infrastructure development position the company attractively to develop large integrated industrial enclaves such as SEZs. DLF is currently developing large township projects in various cities, which are: Bidadi Township. DLF has plans to develop Bidadi integrated township, spread over 9,168 acres on the outskirts of Bangalore, with potential value creation of ~ Rs500bn. The work is estimated to start by mid-CY08 Shivaji Marg. Acquisition of Swatantra Bharat Mill along with pre-owned lands will have a development potential of ~10 mn sqft New Gurgaon. 4,000 acres township falling in the new master plan for Gurgaon, with all segments of residential, commercial and retail Dankuni, Kolkata. 5,000 acres of township on western outskirts of Kolkata South Maharashtra. Acquisition of land started for building a high-end resort city for holiday and luxurious lifestyle
Additionally, DLF's relationships with partners such as Laing O'Rourke plc, a leading UK-based construction company, and Fraport, a European airport developer and operator, has enabled it to foray into infrastructure opportunities such as airports, roads, bridges, tunnels, pipelines, harbours and power projects.
Bidadi project
DLF, in a JV with Limitless Holdings (Nakheel developers), a Middle East-based developer, has received the letter of intent to build an integrated township spread over 9,178 acres at Bidadi, which is 30km from Bangalore. Bidadi is on the BangaloreMysore expressway and the upcoming intercity infrastructure corridor. The per-acre development charges of this self-contained township are likely to be over Rs5.7mn; the township is scheduled to be completed within five years The Government plans to use 2,400 acres for resettlement of the existing 200 settlements in Bidadi and the remaining 5,935 acres will be allocated for development activity. 50% of this land will be used by BMRDA (Bangalore Metropolitan Regional Development Authority) for mixed development and the rest will be developed by DLF. DLF will get an FSI of 2.5 on this project, translating into a development potential of 323mn sqft of saleable area. The Government has already acquired 2,200 acres and the rest will be acquired in the next 5-6 months.
46
DLF, June 18, 2008
ICICI Securities
Cumulative construction schedule
DLF has an aggressive roll-out plan for Residential and Office segments over the next 5-10 years and land bank to support most developments. We expect steep volume growth in both segments going forward. Over the next 10 years, we expect DLF to launch 485mn sqft of residential and 143mn sqft of office space. We expect the company to have sufficient execution capabilities to deliver ~50mn sqft annually by the next 4-5 years. Further, we believe that the companys lease portfolio would grow to ~136mn sqft within the next 10 years. Chart 27: Cumulative construction schedule
250 200 150 100 50 0 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY21 FY22 FY22
FY20 57.9 0.0 59.2 39.0 FY21 18.9 0.0 39.0 19.9
Development schedule
Construction schedule
Chart 28: Cumulative development schedule

250 200 150 100 50 0 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
FY18 185.6 49.1 84.4 79.4
(mn sqft)
Development schedule
New launches
Handed over
(mn sqft)
Table 35: Overall development

(mn sqft)
Development schedule New launches Handed over Construction schedule Source: I-Sec Research
FY09 79.3 44.2 18.4 29.7
FY10 107.0 56.8 29.0 43.7
FY11 121.1 56.5 42.4 51.5
FY12 144.2 70.5 47.4 58.9
FY13 164.1 79.0 59.2 57.5
FY14 185.1 82.5 61.5 49.9
FY15 231.3 98.1 51.9 80.5
FY16 235.7 84.9 80.5 84.9
FY17 220.8 70.0 84.9 84.4
FY19 117.1 10.9 79.4 59.2
FY20
FY22 0.4 0.0 19.9 3.8
47
DLF, June 18, 2008
ICICI Securities Annexure 1: Financials

Table 36: Profit & Loss statement
(Rs mn, year ending March 31) FY06
Sales Rentals Gross Sales Less: Excise Duty Net Sales of which Export Sales of which Domestic Sales Other Operating Income
FY07
FY08
19,602 19,602 19,602 -
40,533 40,533 40,533 -
142,287 142,287 142,287 -
FY09E 155,944 18,520 174,464 174,464 174,464

-
FY10E 179,056 28,932 207,988 207,988 207,988

-
FY11E 192,071 45,872 237,943 237,943 237,943

-
Total Operating Income Less: Raw Material Consumed Other Manufacturing Expenses Power and Fuel Personnel Expenses Selling and Distribution Expenses Other Expenses R&D Expenses Less Amounts Capitalised Total Operating Expenses EBITDA
Depreciation & Amortisation Other Income
19,602
40,533
142,287
174,464
207,988
237,943
8,502 515 269 395 1,176
6,394 720 164 1,051 3,148
35,167 2,147 3,153 4,302
50,691 2,896 4,639 4,733
62,936 3,797 6,636 5,206
72,811 4,778 9,110 5,726
10,857 8,745
358 -
11,477 29,056
578 -
44,768 97,518
785 2,652
62,957 111,506
1,971 2,834
78,575 129,413
3,504 2,697
92,426 145,517
5,403 2,746
EBIT
Less: Gross Interest
8,387
1,685
28,478
3,076
99,385
2,980
112,370
4,814
128,607
7,641
142,861
10,717
Recurring Pre-tax Income

Add: Extraordinary Income Less: Extraordinary Expenses Less: Taxation --Current Tax --Deferred Tax Less: Minority expense & associate profit Net Income (Reported)
6,702
2,590 2,534 56 10 4,102
25,402
6,052 6,046 5 24 19,326
96,405
17,534 17,350 184 313 78,558
107,556
20,113
120,965
24,677
132,144
26,957
344 87,099
379 95,910
417 104,770
Recurring Net Income Source: Company data, I-Sec Research
4,102
19,326
78,558
87,099
95,910
104,770
48
DLF, June 18, 2008 Table 37: Balance sheet

(Rs mn, year ending March 31) FY06 ASSETS Current Assets, Loans & Advances Cash & Bank balance Inventory Sundry Debtors Loans and Advances Operational Others Other Current Assets Total Current Assets Current Liabilities & Provisions Current Liabilities Sundry Creditors Other Current Liabilities Provisions Total Current Liabilities and Provisions Net Current Assets Investments Strategic & Group Investments Other Marketable Investments Total Investments Goodwill Fixed Assets Gross Block Less Accumulated Depreciation Net Block Add: Capital Work in Progress Less: Revaluation Reserve Total Fixed Assets Total Assets LIABILITIES AND SHAREHOLDERS' EQUITY Total Borrowings Deferred Tax Liability Share Capital Paid up Equity Share Capital No. of Shares outstanding (mn) Face Value per share (Rs) Preference Share Capital (convertible) Reserves & Surplus Share Premium General & Other Reserve Less: Misc. Exp. not written off Less: Revaluation Reserve Net Worth Minority Interest Total Liabilities & Shareholders' Equity Source: Company data, I-Sec Research 41,320 92 99,328 187 122,609 371 FY07 FY08
ICICI Securities
FY09E
FY10E
FY11E
1,950 16,409 6,580 10,642 10,642 23 35,604 218
4,155 57,006 15,195 52,371 52,371 67 128,794 331
19,371 94,803 79,075 77,325 77,130 247 270,821 195
32,162 148,105 87,262 90,071 89,817 247 357,847 254
35,265 205,200 93,627 100,936 100,626 247 435,275 310
37,972 268,580 96,400 103,926 103,563 247 507,124 363
15,095 1,251 13,844 3,374 18,469 17,135
33,450 2,678 30,772 8,979 42,429 86,365
42,013
4,017 37,996
18% 25,724
70,899 6,779 64,120 17% 30,097 100,996 256,850
97,336 9,307 88,029 17% 36,116 133,452 301,823
114,494 10,947 103,547 19% 44,062 158,556 348,569
67,737 203,084
8,300
2,107
8,761
8,761
8,761
8,761
8,300 8,489
2,107 8,935
8,761 20,781
8,761 20,781
8,761 20,781
8,761 20,781
13,023 1,891 11,132 5,911
17,787 2,412 15,375 26,497
52,860 3,377 49,483 50,575
78,525 5,348 73,177 79,025
121,682 8,851 112,830 117,283
187,052 14,254 172,798 162,507
17,043 50,967
41,872 139,279
100,058 332,684
152,202 438,594
230,113 561,478
335,305 713,416
150,609 371
188,609 371
248,609 371
378 38 10 -
3,059 1,529 2 9,498
3,410 1,705 2 13,960
3,410 1,705 2 13,960
3,410 1,705 2 13,960
3,410 1,705 2 13,960
214 8,909
117 26,998
90,495 97,917
90,495 175,043
90,495 258,985
90,495 349,793
9,501 54 50,967
39,672 92 139,279
205,781 3,923 332,684
282,907 4,708 438,594
366,849 5,649 561,478
457,657 6,779 713,416
49
DLF, June 18, 2008 Table 38: Cash flow statement

(Rs mn, year ending March 31) FY06 Cash Flow from Operating Activities Reported Net Income Add: Depreciation & Amortisation Provisions Deferred Taxes Less: Other Income Net Extra-ordinary income Operating Cash Flow before Working Capital change (a) Changes in Working Capital (Increase) / Decrease in Inventories (Increase) / Decrease in Sundry Debtors (Increase) / Decrease in Operational Loans & Adv. (Increase) / Decrease in Other Current Assets Increase / (Decrease) in current liabilities Increase / (Decrease) in Other Current Liabilities Working Capital Inflow / (Outflow) (b) Net Cash flow from Operating Activities (a) + (b) Cash Flow from Capital commitments Purchase of Fixed Assets Purchase of Investments Consideration paid for acquisition of undertaking Cash Inflow/(outflow) from capital commitments (c) Free Cash flow after capital commitments (a) + (b) + (c) Cash Flow from Investing Activities Purchase of Marketable Investments (Increase) / Decrease in Other Loans & Advances Sale of Fixed Assets Sale of Investments Consideration received for sale of undertaking/division Other Income Net Cash flow from Investing Activities (d) Cash Flow from Financing Activities Issue of Share Capital during the year Proceeds from fresh borrowings Repayment of Borrowings Buyback of Shares Dividend paid including tax Others Net Cash flow from Financing Activities (e) Net Extra-ordinary Income (f) Total Increase / (Decrease) in Cash (a) + (b) + (c) + (d)+ (e) + (f) Opening Cash and Bank balance Closing Cash and Bank balance Increase/(Decrease) in Cash and Bank balance Source: Company data, I-Sec Research
4,102 342 2,413 56 0 0 6,913
ICICI Securities
FY07
19,326 521 5,605 5 0 0 25,458
FY08
78,558 965 16,745 184 2,652 0 93,800
FY09E
87,099 1,971 4,373 0 2,834 0 90,608
FY10E
95,910 3,504 6,019 0 2,697 0 102,735
FY11E
104,770 5,403 7,946 0 2,746 0 115,372
(9,360) (3,728) (4,623) (3) 6,712
(40,597) (8,615) (41,729) (44) 18,355
(37,797) (63,880) (24,759) (180) 8,563
(53,302) (8,187) (12,687) 0 28,886
(57,095) (6,365) (10,809) 0 26,436
(63,380) (2,773) (2,936) 0 17,158
(11,002)
(72,630) (118,053)
(45,289)
(47,832)
(51,932)
(4,089)
(47,172)
(24,253)
45,319
54,903
63,440
(7,175) (7,900) (7,967) (23,042)
(25,350) 6,193 (446) (19,603)
(59,151) (6,654) (11,846) (77,651)
(54,115) 0 0 (54,115)
(81,415) 0 0 (81,415)
(110,595) 0 0 (110,595)
(27,131)
(66,775) (101,904)
(8,796)
(26,512)
(47,155)
0 0
0 0
0 (195)
0 (59)
0 (56)
0 (53)
2,652
2,834
2,697
2,746
2,457
2,775
2,641
2,693
343 31,644 0 (18) (3,312) 28,657
2,681 58,008 0 (3,989) 12,281 68,981
351 23,281 0 (7,978) 99,009 114,663
0 28,000 0 (9,973) 785 18,812
0 38,000 0 (11,967) 942 26,974
0 60,000 0 (13,962) 1,130 47,168
0 1,526
0 2,205
0 15,216
0 12,791
0 3,104
0 2,706
424 1,950 1,526
1,950 4,155 2,205
4,155 19,371 15,216
19,371 32,162 12,791
32,162 35,265 3,104
35,265 37,972 2,706
50
DLF, June 18, 2008 Table 39: Key ratios

(Year ending March 31) FY06 Per Share Data (Rs) Diluted Recurring Earning per share (DEPS) Diluted Earnings per share Recurring Cash Earnings per share (CEPS) Free Cashflow per share (FCPS-post capex) Reported Book Value (BV) Adjusted Book Value (ABV) ** Dividend per share Valuation Ratios (x) Diluted Price Earning Ratio Price to Recurring Cash Earnings per share Price to Book Value Price to Adjusted Book Value Price to Sales Ratio EV / EBITDA EV / Total Operating Income EV / Operating Free Cash Flow (Pre-Capex) EV / Net Operating Free Cash Flow (Post-Capex) Dividend Yield (%) Growth Ratios (% YoY) Diluted Recurring EPS Growth Diluted Recurring CEPS Growth Total Operating Income Growth EBITDA Growth Recurring Net Income Growth Operating Ratios (%) EBITDA Margins EBIT Margins Recurring Pre-tax Income Margins Recurring Net Income Margins Raw Material Consumed / Sales SGA Expenses / Sales Other Income / Pre-tax Income Other Operating Income / EBITDA Effective Tax Rate Return / Profitability Ratios (%) Return on Capital Employed (RoCE)-Overall Return on Invested Capital (RoIC) Return on Net Worth (RoNW) Dividend Payout Ratio Solvency Ratios / Liquidity Ratios (%) Debt Equity Ratio (D/E) Long Term Debt / Total Debt Net Working Capital / Total Assets Interest Coverage Ratio-based on EBIT Debt Servicing Capacity Ratio (DSCR) Current Ratio Cash and cash equivalents / Total Assets Turnover Ratios Inventory Turnover Ratio (x) Assets Turnover Ratio (x) Working Capital Cycle (days) Average Collection Period (days) Average Payment Period (days) Average Inventory Days (days) Average Debtor days (days) Source: Company data, I-Sec Research
108.5 108.5 118.0 (717.8) 251.3 251.3 0.4
ICICI Securities
FY07
12.6 12.6 13.0 (43.7) 19.7 19.7 2.2
FY08
46.1 46.1 46.5 (59.8) 112.5 112.5 4.0
FY09E
51.1 51.1 52.2 (5.2) 157.8 157.8 5.0
FY10E
56.3 56.3 58.3 (15.6) 207.0 207.0 6.0
FY11E
61.5 61.5 64.6 (27.7) 260.3 260.3 7.0
4.5 4.2 2.0 2.0 1.0 6.6 3.0 (14.2) (2.1) 0.1
39.0 37.9 25.0 25.0 18.6 29.6 21.2 (18.2) (12.9) 0.5
10.7 10.6 4.4 4.4 5.9 9.8 6.7 (39.5) (9.4) 0.8
9.4 9.2 3.0 3.0 4.8 8.5 5.4 21.0 (108.1) 1.0
8.5 8.2 2.3 2.3 4.0 7.6 4.7 17.9 (37.2) 1.2
7.8 7.4 1.8 1.8 3.5 7.2 4.4 16.4 (22.1) 1.4
(56.1) (65.5) 213.1 369.9 374.2
(88.4) (89.0) 106.8 232.3 371.1
264.7 257.6 251.0 235.6 306.5
10.9 12.3 22.6 14.3 10.9
10.1 11.6 19.2 16.1 10.1
9.2 10.8 14.4 12.4 9.2
44.6 42.8 34.2 20.9 43.4 0.0 0.0 0.0 38.7
71.7 70.3 62.7 47.7 15.8 0.0 0.0 0.0 23.8
68.5 69.8 66.5 54.2 24.7 0.0 2.8 0.0 18.2
63.9 64.4 60.7 49.1 29.1 0.0 2.6 0.0 18.7
62.2 61.8 57.4 45.5 30.3 0.0 2.2 0.0 20.4
61.2 60.0 54.9 43.5 30.6 0.0 2.1 0.0 20.4
14.9 26.2 48.3 0.4
22.8 31.6 97.4 17.6
34.3 43.5 70.8 8.7
23.6 31.0 37.8 9.8
20.4 27.8 30.8 10.7
17.8 24.2 26.3 11.4
435.9 100.0 29.8 497.8 480.4 135.2 3.8
250.8 100.0 59.0 925.8 920.8 180.1 3.0
59.8 100.0 55.2 3,335.4 3,343.6 285.7 5.8
53.4 100.0 51.2 2,334.2 2,356.4 265.1 7.3
51.5 100.0 47.5 1,683.0 1,708.5 250.5 6.3
54.4 100.0 43.5 1,333.0 1,363.0 254.3 5.3
0.82 0.57 69.8 87.8 37.2 218 88
0.21 0.43 182.3 98.0 62.5 331 98
0.50 0.61 204.9 120.9 27.3 195 121
0.46 0.46 306.0 174.0 31.3 254 174
0.40 0.42 322.6 158.7 37.4 310 159
0.35 0.38 341.7 145.7 40.0 363 146
51
DLF, June 18, 2008
ICICI Securities Annexure 2: Index of Tables and Charts

Tables
Table 1: Regional classification ............................................................................................ 3 Table 2: Segmental classification ......................................................................................... 4 Table 3: Mid-income housing Development schedule....................................................... 6 Table 4: Mid-income housing Construction schedule ........................................................ 7 Table 5: Mid-income housing Sales schedule ................................................................... 7 Table 6: Cumulative lease area ............................................................................................ 9 Table 7: Valuations ............................................................................................................. 13 Table 8: Assumptions ......................................................................................................... 15 Table 9: Terminal value ...................................................................................................... 16 Table 10: Valuations Assets on book .............................................................................. 17 Table 11: Option value........................................................................................................ 17 Table 12: Scenario analysis................................................................................................ 17 Table 13: Cumulative office supply across 7 key cities ...................................................... 25 Table 14: Addition in retail space........................................................................................ 26 Table 15: Mid-income housing Development schedule................................................... 32 Table 16: Mid-income housing Construction schedule.................................................... 32 Table 17: Mid-income housing Sales schedule ............................................................... 32 Table 18: Luxury housing Development schedule........................................................... 33 Table 19: Luxury housing Construction schedule............................................................ 33 Table 20: Luxury housing Sales schedule ....................................................................... 33 Table 21: Super Luxury housing Development schedule ................................................ 33 Table 22: Super Luxury housing Construction schedule ................................................. 34 Table 23: Super Luxury housing Sales schedule ............................................................ 34 Table 24: Commercial Segment Development schedule ................................................ 36 Table 25: Office segment Development schedule ........................................................... 37 Table 26: Office segment Construction schedule ............................................................ 37 Table 27: Office segment Lease schedule (cumulative).................................................. 37 Table 28: Office segment Sales schedule ....................................................................... 37 Table 29: Retail segment Development schedule ........................................................... 41 Table 30: Hotel segment Development schedule ............................................................ 42 Table 31: Hotel segment Development schedule ............................................................ 43 Table 32: Hotel segment Construction schedule ............................................................. 44 Table 33: Hotel segment Lease schedule ....................................................................... 44 Table 34: Current SEZ status ............................................................................................. 45 Table 35: Overall development ........................................................................................... 47 Table 36: Profit & Loss statement....................................................................................... 48 Table 37: Balance sheet ..................................................................................................... 49 Table 38: Cash flow statement ........................................................................................... 50 Table 39: Key ratios ............................................................................................................ 51
52
DLF, June 18, 2008
ICICI Securities
Charts
Chart 1: DLF landbank Regional break-up ........................................................................ 3 Chart 2: Expanding footprint across India............................................................................. 4 Chart 3: Residential segment break-up ................................................................................ 7 Chart 4: Mid-income housing Regional break-up .............................................................. 7 Chart 5: Cumulative lease area ............................................................................................ 8 Chart 6: Office segment Valuations breakup ................................................................... 14 Chart 7: Residential segment Valuations breakup .......................................................... 14 Chart 8: Retail segment Valuations breakup ................................................................... 15 Chart 9: Growth in Net housing disbursement (Banks) ...................................................... 23 Chart 10: Affordability ......................................................................................................... 24 Chart 11: DLF Organisation structure.............................................................................. 28 Chart 12: DLF Development over the years .................................................................... 28 Chart 13: Mid-income development schedule .................................................................... 31 Chart 14: Luxury housing development schedule .............................................................. 31 Chart 15: Super-luxury housing development schedule..................................................... 31 Chart 16: Construction schedule residential ....................................................................... 32 Chart 17: Office Development pipeline ............................................................................ 35 Chart 18: Office Cumulative lease-able area................................................................... 36 Chart 19: Construction schedule ........................................................................................ 36 Chart 20: DAL to be a major buyer of DLF properties ........................................................ 38 Chart 21: Development schedule ....................................................................................... 40 Chart 22: Construction schedule ........................................................................................ 40 Chart 23: Lease schedule ................................................................................................... 40 Chart 24: Hotel segment Development schedule ............................................................ 42 Chart 25: Hotel segment Lease schedule........................................................................ 43 Chart 26: Hotel segment Construction schedule ............................................................. 43 Chart 27: Cumulative construction schedule ...................................................................... 47 Chart 28: Cumulative development schedule ..................................................................... 47
53
DLF, June 18, 2008
ICICI Securities
ANALYST CERTIFICATION
We /I, Gaurav Pathak, PGDM, BTech; Shaleen Silori, MBA (Finance), BTech analysts and the authors of this report, hereby certify that all of the views expressed in this research report accurately reflect our personal views about any and all of the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Analysts aren't registered as research analysts by FINRA and might not be an associated person of the ICICI Securities Inc.
Disclosures:
ICICI Securities Limited (ICICI Securities) and its affiliates are a full-service, integrated investment banking, investment management and brokerage and financing group. We along with affiliates are leading underwriter of securities and participate in virtually all securities trading markets in India. We and our affiliates have investment banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. Our research professionals provide important input into our investment banking and other business selection processes. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their dependent family members from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. While we would endeavour to update the information herein on reasonable basis, ICICI Securities, its subsidiaries and associated companies, their directors and employees (ICICI Securities and affiliates) are under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Nonrated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities is acting in an advisory capacity to this company, or in certain other circumstances. This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgement by any recipient. The recipient should independently evaluate the investment risks. The value and return of investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities and affiliates accept no liabilities for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice. ICICI Securities and its affiliates might have managed or co-managed a public offering for the subject company in the preceding twelve months. ICICI Securities and affiliates might have received compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of public offerings, corporate finance, investment banking or other advisory services in a merger or specific transaction. ICICI Securities and affiliates expect to receive compensation from the companies mentioned in the report within a period of three months following the date of publication of the research report for services in respect of public offerings, corporate finance, investment banking or other advisory services in a merger or specific transaction. It is confirmed that Gaurav Pathak, PGDM, BTech; Shaleen Silori, MBA (Finance), BTech research analysts and the authors of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months. Our research professionals are paid in part based on the profitability of ICICI Securities, which include earnings from Investment Banking and other business. ICICI Securities or its affiliates collectively do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report. It is confirmed that Gaurav Pathak, PGDM, BTech; Shaleen Silori, MBA (Finance), BTech research analysts and the authors of this report or any of their family members does not serve as an officer, director or advisory board member of the companies mentioned in the report. ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. ICICI Securities and affiliates may act upon or make use of information contained in the report prior to the publication thereof. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. This report has not been prepared by ICICI Securities, Inc. However, ICICI Securities, Inc. has reviewed the report and, in so far as it includes current or historical information, it is believed to be reliable, although its accuracy and completeness cannot be guaranteed
54
DLF, June 18, 2008

EQUITIES
A Murugappan
ICICI Securities
Executive Director +91 22 6637 7101 a_murugappan@isecltd.com Equity Research Telephone : +91 22 2288 2460/70 Fax: +91 22 2288 2448 SECTOR ALLOCATION DIRECT NOS. E-MAIL Head of Research Strategy, Capital Goods, +91 22 6637 7311 girish_pai@isecltd.com Engineering, Midcaps Aviation, Logistics, Infrastructure +91 22 6637 7271 amar_kedia@isecltd.com Oil & Gas, Petrochemicals +91 22 6637 7274 amit_mishra@isecltd.com Real Estate +91 22 6637 7339 gaurav_pathak@isecltd.com Technology +91 22 6637 7254 krupal_maniar@isecltd.com Cement, Utilities +91 22 6637 7385 novonil_guha@isecltd.com Telecom +91 22 6637 7443 poonam_nishal@isecltd.com Agriculture, Utilities +91 22 6637 7373 prakash_goel@isecltd.com Pharmaceuticals +91 22 6637 7508 rajesh_vora@isecltd.com Metals +91 22 6637 7314 rahul_jain@isecltd.com FMCG +91 22 6637 7386 sanjay_singh@isecltd.com Technology +91 22 6637 7114 sandeep_shah@isecltd.com Automobiles, Healthcare +91 20 6401 7125 shilpa_gupta@isecltd.com Banking +91 22 6637 7298 siddharth_teli@isecltd.com Capital Goods, Engineering, Strategy +91 22 6637 7230 sumeet_budhraja@isecltd.com Media +91 22 6637 7161 vikash_mantri@isecltd.com Sr. Associate (Oil&Gas, Petrochemicals) +91 22 6637 7480 gagan_dixit@isecltd.com Sr. Associate (Textiles) +91 22 6637 7143 nishant_bhargava@isecltd.com Sr. Associate (Construction) +91 22 6637 7366 swarit_dakalia@isecltd.com Sr. Associate (Capital Goods, Engineering, Strategy) +91 22 6637 7312 sunil_teluja@isecltd.com Associate (Banking) +91 22 6637 7231 alok_kapadia@isecltd.com Associate (Metals) +91 22 6637 7289 abhijit_mitra@isecltd.com Associate (Banking) +91 22 6637 7351 abhishek_murarka@isecltd.com Associate +91 22 6637 7297 amit_shah@isecltd.com Associate (Automobiles) +91 22 6637 7380 hemant_joshi@isecltd.com Associate (Media) +91 22 6637 7436 rishi_agrawal@isecltd.com Associate (Technology) +91 22 6637 7225 sagar_thakkar@isecltd.com Associate (Infrastructure) +91 22 6637 7159 sanket_maheshwari@isecltd.com Associate (Real Estate) +91 22 6637 7188 shaleen_silori@isecltd.com Editor +91 11 2439 0154 prakriti_singh@isecltd.com Editor +91 22 6637 7202 simmu_kahlon@isecltd.com Production +91 22 6637 7135 hemant_jathar@isecltd.com Production +91 22 6637 7442 ruben_fernandes@isecltd.com Equity Sales Asia-Pacific Telephone : +91 22 2288 2460/70 Fax: +91 22 2288 2341 +91 22 6637 7367 kim_collaco@isecltd.com +91 22 6637 7229 rishikesh_joshi@isecltd.com +91 22 6637 7223 sachin_shahane@isecltd.com +91 22 6637 7275 ts_baskaran@icicisecurities.com +65 6823 1557 vinay_patel@isecltd.com Equity Sales Europe Telephone : +91 22 2288 2460/70 Fax: +91 22 2288 2341 +91 22 6637 7152 darshit_shah@isecltd.com Equity Sales US Telephone : +1 212-921-2344 / +1 212 453 670 +1 646-701-4465 melrick_dsouza@icicisecurities.com Equity Dealing Telephone : +91 22 2281 4570 Fax: +91 22 2288 2341 +91 22 6637 7130 kishore_chinai@isecltd.com +91 22 6637 7227 dharmesh_desai@isecltd.com +91 22 6637 7279 pinakin_mistry@isecltd.com Equity Derivatives Telephone : +91 22 2288 2460/70 Fax: +91 22 2288 2341 +91 22 6637 7365 ck_narayanan@isecltd.com +91 22 6637 7455 sriram_jagdish@isecltd.com +91 22 6637 7131 anant_rao@isecltd.com +91 22 6637 7281 darshan_seth@isecltd.com +91 22 6637 7193 rishad_tehrani@isecltd.com +91 22 6637 7288 rohit_dhundele@isecltd.com
ANALYST
Girish Pai Amar Kedia Amit Mishra Gaurav Pathak Krupal Maniar, CFA Novonil Guha Poonam Nishal Prakash Goel Rajesh Vora Rahul Jain Sanjay Singh Sandeep Shah Shilpa Gupta Siddharth Teli Sumeet Budhraja Vikash Mantri, CFA Gagan Dixit Nishant Bhargava Swarit Dakalia Sunil Teluja Alok Kapadia Abhijit Mitra Abhishek Murarka Amit Shah Hemant Joshi Rishi Agrawal Sagar Thakkar Sanket Maheshwari Shaleen Silori Prakriti Singh Simmu Kahlon Hemant Jathar Ruben Fernandes Kim Collaco Rath Rishikesh Joshi Sachin Shahane T S Baskaran Vinay Patel Darshit Shah Melrick DSouza Kishore Chinai Dharmesh Desai Pinakin Mistry Dr. C. K. Narayan Sriram Jagdish Anant Rao Darshan Seth Rishad Tehrani Rohit Dhundele
ICICI Securities Limited ICICI Centre, H T Parekh Marg, Churchgate, Mumbai 400 020, Telephone: +91 22 2288 2460/70 Fax: +91 22 2288 2448 ICICI Securities Inc. ICICI Securities Inc. Level 57, Republic Plaza, 9, Raffles Place, Singapore 048 619 1 Liverpool Street, London EC2M 7QD, United Kingdom. Telephone: +65 6823 1556/57 Fax: +65 6823 1425 Tel (Board): +44 20 79562051, Tel (Direct): +44 20 79562554 / 2555 Fax: +44 20 79562211 ICICI Securities Inc. 461, 5th Avenue, 16th Floor, New York, NY 10017, USA. Telephone: +1 212-921-2344 / +1 212 453 6704 Fax: +1 212-453-6710
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Equity Research

June 18, 2008 BSE Sensex: 15422

Please refer to important disclosures at the end of this report

DLF, June 18, 2008

DLF, June 18, 2008

ICICI Securities De facto India real-estate play

Chart 1: DLF landbank Regional break-up

Metros (345, 47%)

Source: Company data, I-Sec Research

DLF, June 18, 2008 Chart 2: Expanding footprint across India

Source: Company data

DLF, June 18, 2008

DLF, June 18, 2008

ICICI Securities Volume growth

Table 3: Mid-income housing Development schedule

0.5 6.7 4.8 2.4 14.3

5.7 8.0 7.9 1.5 23.0

9.3 11.7 6.3 0.7 28.0

15.6 16.0 6.9 0.7 39.2

16.4 19.1 8.1 1.0 44.7

17.6 25.1 9.6 1.4 53.6

22.6 31.6 10.0 1.6 65.8

17.0 33.6 6.3 1.6 58.5

13.9 34.2 4.0 1.3 53.4

7.1 25.8 1.7 0.5 35.1

1.0 9.8 0.2 0.0 10.9

0.0 0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0

0.2 3.6 1.4 0.7 5.9

1.9 6.6 3.8 1.2 13.4

4.7 8.6 6.1 1.6 21.0

8.2 9.9 6.4 0.9 25.4

10.1 11.7 5.5 0.6 28.0

10.7 12.8 5.3 0.7 29.5

17.6 21.7 8.4 1.1 48.8

18.1 26.0 8.5 1.3 53.9

18.0 30.3 7.9 1.5 57.6

16.3 31.5 6.2 1.3 55.4

11.0 27.4 3.6 1.0 43.0

6.8 20.4 1.9 0.6 29.7

2.7 11.5 0.7 0.2 15.0

DLF, June 18, 2008 Table 4: Mid-income housing Construction schedule

Table 5: Mid-income housing Sales schedule

Chart 3: Residential segment break-up

Mid Housing 90%

Chart 4: Mid-income housing Regional break-up

Metros 53% Source: Company data, I-Sec Research

DLF, June 18, 2008

ICICI Securities Burgeoning lease portfolio

Source: Company data, I-Sec Research

DLF, June 18, 2008 Table 6: Cumulative lease area

FY19 84.2 46.1 16.6 146.9

FY20 90.3 48.0 16.6 155.0

FY21 94.1 48.8 16.6 159.6

FY22 97.3 49.0 16.6 162.9

DLF, June 18, 2008

ICICI Securities Joint ventures Growth enablers

Infrastructure 50:50 JV with Laing ORourke Plc

Design and Engineering 50:50 JV with WSP

Project management 19% share in Feedback Ventures

Hotels 74:26 JV with Hilton