Rationale

 The reaffirmation of ratings factors in the Group’s1 healthy improvement in collections in FY2024, driven by strong response to new launches, healthy sales and construction progress in the ongoing projects, which is expected to sustain in FY2025. ICRA estimates the sales [excluding One Midtown project in joint venture (JV)] in FY2024 to slightly moderate from FY2023 level (PY: Rs. 14,516 crore). However, the sales remain healthy and are likely to grow marginally in FY2025. Its collections are projected to increase by 37-40% YoY (PY: Rs. 5,293 crore) in FY2024 and grow further by 26-28% in FY2025. The Group’s consolidated gross debt is estimated to increase in March 2024 for expansion purpose (Rs. 2,948 crore as of December 2023 and Rs. 3,066 crore as of March 2023). DLF’s leverage, gross debt/CFO was at ~1 times as of March 2023 and is likely to remain comfortable at around 0.9 – 1.1 times over the medium term. The committed receivables cover remained robust at around 152% of the balance construction cost of Rs. 9,757 crore, with total debt outstanding of Rs. 2,948 crore as on December 31, 2023. As on December 31, 2023, around 34% of the Group’s external debt is against rental collections from the leased portfolio (including retail and office), ensuring a relatively stable revenue stream. ICRA expects the gross debt/rentals of the leased portfolio to be ~3.5 to 4 times in the medium term. The ratings derive comfort from DLF’s strong market position and established brand, particularly in the National Capital Region (NCR) and exceptional financial flexibility. The ratings consider the Group’s low cost and fully paid-up land bank, which provides strong visibility of launches with healthy profitability. DLF derives significant financial flexibility as well as dividend income from its investment in DLF Cyber City Developers Limited (DCCDL, rated [ICRA]AA+ (Stable)/A1+), which owns one of the largest commercial real estate leasing portfolios in the country. The ratings are, however, constrained by the cyclical nature of the residential real estate industry and exposure to execution and market risks arising from its growth plans (estimated launch pipeline of around 8 msf in FY2025). While new projects will offer diversification in terms of geography (expected launches in Goa, Tri City, etc), any decline in demand may adversely impact the cash flow position. Nevertheless, ICRA expects DLF to benefit from its strong brand and healthy affordability in the residential real estate market. That said, high dependence on the NCR real estate market exposes the sales to any regionspecific downturn in demand. Moreover, DLF has certain under-development projects in JV companies, which expose the JVs to execution and marketing risks. While these projects are expected to be incrementally funded out of their collections from customers and sanctioned line of credit, support from DLF to the extent of its share of any shortfall in cash flows of the JVs has been considered in the ratings. DLF has significant contingent liabilities, primarily on account of matters pertaining to taxes, indemnities provided to DCCDL, and penalty imposed by the Competition Commission of India (CCI). Any crystallisation of these liabilities exerting pressure on DLF’s cash flows will remain a key rating sensitivity. While ICRA notes the stated intent of the Group on debt reduction over the medium term, any substantial discretionary outflows towards land or other capital expenditure and the impact of the same on its leverage and coverage metrics will remain a rating sensitivity. The Stable outlook on the rating reflects ICRA’s expectation that the Group will sustain healthy operating performance, backed by healthy end-user demand and a strong launch pipeline. Further, the outlook underlines ICRA’s expectation that the Group will maintain healthy cash flow from operations, strong liquidity and comfortable leverage metrics.