DLF Exposed To Risks From Foray Into Non-Realty Markets

New Delhi: DLF Ltd, the country's biggest realty firm, is exposed to "significant business risks" from its planned diversification beyond core real estate sector as most of these new ventures are capital intensive and have long gestation periods, rating agency Crisil has said।

Crisil said in a rating note that its ratings on DLF's bank loan facilities, long-term and short-term borrowings are driven by "the company's strong business risk profile, robust financial risk profile, conservative financial policy and significant financial flexibility"।

However, it observed that these strengths are partially offset by the risks inherent to the Indian real estate industry and DLF's aggressive plan to diversify into non-real estate businesses।

While taking note of DLF's plans to invest in non-realty businesses like hospitality, insurance, asset management and wind energy, the agency said, "these new ventures are capital intensive and have long gestation periods".
"Crisil, therefore, believes that DLF will be exposed to significant business risk as a result of such a diversification"।

Crisil said it has given a stable outlook for DLF, believing that the company's strong business risk profile and conservative gearing policy would considerably reduce the impact of any downturn in India's realty sector on its credit risk profile।

Crisil noted that outlook might be revised to 'positive' if the company is able to execute its new ventures successfully, without an adverse impact on its financial risk profile।

"The strong market position, low-cost land bank and high economies of scale of development characterise the strong business risk profile of the company," it said.