DLF Ltd

NSE:DLF

Earnings Call Transcript 2021-Q2

[Vivek Anand, Group Chief Financial Officer]

Thank you. Good evening, and welcome to DLF Limited Quarter 2 Financial Year '21 Earnings Call. Thank you for joining us for our earnings call. We hope all of you are keeping good health. Our business exhibited strong performance amidst these uncertain times. We remain committed and confident in delivering our business goals. Let me start with the key highlights of the quarter. So I'll start with financial highlights for quarter 1 financial year '21 DLF Limited consolidated results. Consolidated revenue stood at INR 1,723 crores as compared to INR 646 crores in quarter 1 financial year '21, reflecting a 2.6x growth. EBITDA stood at INR 576 crores compared to INR 100 crores in the previous quarter. Net profit at INR 236 crores compared to net loss of INR 72 crores in the previous quarter. Handover of Camellias and consequent revenue recognition commenced this quarter, leading to higher top line and margin improvement. I'll now move on to the financial highlights for quarter 1 financial year '21 for DLF Cyber City Developers Limited consolidated. The rental business continued to exhibit resilience. Quarter-on-quarter growth recorded, with retail business witnessing gradual recovery after the lockdown. Consolidated revenue of INR 1,040 crores, implying a quarter-on-quarter growth of 12%. EBITDA stood at INR 803 crores as compared to INR 728 crores in the previous quarter, a 10% growth quarter-on-quarter. Net profit stands at INR 171 crores. I'll now move to the business outlook. The COVID-19 caused an unprecedented impact on the economy and the consumer sentiment in the short term. Gradual recovery is being witnessed, though uncertainty and caution continues. We, however, remain optimistic about our business and its growth returning to normalcy. The residential business is seeing green shoots of demand, with consumer interest witnessing rising trends. Keeping in line with these trends, our net sales for the quarter rose to INR 853 crores as compared to INR 152 crores in the previous quarter. We believe that consistent quality supply, in conjunction with affordability, will lead to overall recovery in demand. Hence, we are focusing on monetizing our completed inventory, along the development of a strong pipeline of new products with diversified offerings across segments and geographies. We have planned pipeline of 35 million square feet spread across value, premium and luxury segments. We are planning to launch approximately 12 million square feet of new products within the next 18 months, DLF City floors and plots in the current quarter and 1 midtown in Central Delhi in quarter 4. Our long-term outlook towards the rental business remains positive. Office business remains stable and continues to exhibit strong collections of 98% plus, including the opening balance. Cyber Park, a 2.5 million square feet commercial development in Gurugram, commenced operations from August. The addition of this asset to the rental portfolio will lead to an annualized incremental revenue of INR 375 crores. The company signed a major pre-leasing deal of 7.7 lakh square feet with StanChart GBS in Downtown Chennai for setting up of its largest campus globally. The development of Downtown at Gurugram and Chennai projects remain on track. The retail segment is witnessing gradual recovery, with the luxury segment exhibiting better trends. With all our retail properties now open, and restrictions lifted for multiplexes and entertainment zones, we expect an increase in footfall leading to recovery. Current footfalls are at 35% to 40% of pre-COVID levels. Although one trend that is pertinent to note is that the average spend per footfall was higher than expected. We hope that the festive season might provide the required fill-up for this segment. DLF Group, in line with our objective of offering a safe and sustainable ecosystem for its customers, achieved the following during the quarter. DLF Group comprising of office, retail, residential and hospitality received the world's highest WELL Health and Safety certification for facility operation and management from the best wellness certification organization, IWBI. DLF Group is the first organization globally to achieve such a certification at group level. We also received COVID-19 Assurance Certification from British Safety Council for return to work by adopting the requisite guidance. We also published ESG report for financial year '20. KPMG has provided its assurance on this report. The report is available on our website and the link given in our presentation. We continue to maintain significant reduction of overheads, enabling margin improvement in times ahead. Overheads outflow reduced by 35% in first half financial year '21. We expect to sustain this at levels for the fiscal. We are also working extensively to reduce the interest cost by negotiating for all our debt facilities across the group, targeting a year-on-year reduction of around 120-plus basis point at year-end. Tight cash management led to net debt being flat despite the tough operating conditions. The company has also initiated the process of getting the rental business REIT ready. I think with this, I finish my holding statement, and thank you for listening to me. And we'll now open up for questions. And myself, Sriram and Ashok will be happy to take on any questions you may have.

[Operator]

[Operator Instructions] The first question is from the line of Saurabh Kumar from JPMorgan.

[Saurabh S. Kumar, Senior Analyst]

I had 2 questions on the residential business and 1 on DCCDL. So one is this AmEx presales, which you have included. Could you comment what is the value of that? And I thought AmEx was already included in the earlier quarter. So if you could comment on that. And the second is on the club house of Camellias. When is it getting ready? How many units have you sold in Camellias in the last quarter? Was 300 just seen in October? And what's your expectation of the sales of the club house at SEBIs.The last is on DCCDL. So the Cyber Park rent, is it included in Q2 for the full INR 375 crores? Or do we expect that to happen in Q3. So these are the 2 ones, sir.

[Vivek Anand, Group Chief Financial Officer]

Okay. So let me start with the third one first. The Cyber Park's rent is including starting October, right? I will move on to the first question, which is the AmEx. Now AmEx, this was more of a sale of a commercial building, which we did. And this was with AmEx, and this was done with 2 parts. First, we did the land sale, which was amounting to INR 300 crores. And the second part of this deal was construction, which is amounting to INR 380 crores. The total deal value is INR 680 crores. And to your question, how much have we recognized in our new sales booking, that's INR 380 crores, which is basically the second leg of this transaction related to construction.

[Ashok Kumar Tyagi, Whole]

So Saurabh, if I may. The AMEX deal was a INR 680-odd crores commercial campus deal, which was broken up because of a variety of reasons by them into a separate land transaction and a construction transaction. We're not -- you know we're not a construction contractor otherwise. So that's the INR 380 crores, that's a component here.

[Saurabh S. Kumar, Senior Analyst]

But this INR 380 crores will be like a 10% margin, right? I mean that's...

[Vivek Anand, Group Chief Financial Officer]

The INR 380 crores is the 10% margin. The earlier INR 300 crores was like a 70% margin or something. You're right.

[Ashok Kumar Tyagi, Whole]

And the third question was on the club house. So in terms of the absolute numbers of Camellia sellout, you asked, it's around 270. We still have close to 170 left in our inventory.

[Saurabh S. Kumar, Senior Analyst]

And how much did you...

[Ashok Kumar Tyagi, Whole]

And the club house is expected to be ready by December.

[Vivek Anand, Group Chief Financial Officer]

We sold 11 in the last quarter.

[Ashok Kumar Tyagi, Whole]

11?

[Vivek Anand, Group Chief Financial Officer]

In the last quarter, yes, we sold 11 units.

[Ashok Kumar Tyagi, Whole]

11 units.

[Saurabh S. Kumar, Senior Analyst]

And how much have you sold in October, sir?

[Ashok Kumar Tyagi, Whole]

October, I think we've sold 2 or 3. I'm not sure. But I think 2 or 3 have been consummated in October.

[Saurabh S. Kumar, Senior Analyst]

Okay. And this Cyber Park rent you said on DCCDL, effectively, this INR 800 crore EBITDA should now move to something like INR 930 crores, right? If I just take your...

[Sriram Khattar]

Saurabh, Sriram here. The rental inflow, which is what we call the RCB started in the month of August. And it will ramp up between now and March. So till the end of 30th September, which is Q2, the actual rental was only INR 30 crores, INR 40 crores, but the monthly run rate of rental will keep going up. And as we exit 31st March, it will go up to between INR 26, INR 27 crores to INR 30 crores, INR 31 crores as of 31st March. So out of 2.5 million square feet that is there, we have leased out everything other than the last about 160,000, 180,000 square feet. And we are hoping to lease that by 31st March, so that we have a run rate of at least INR 30 crores starting first April, INR 30 crores a month.

[Saurabh S. Kumar, Senior Analyst]

So where I'm coming from here is, DCCDL, you were hoping that Q4 you had said about INR 3,600 crores, I mean, rental. Is that on track in your view?

[Vivek Anand, Group Chief Financial Officer]

Yes. So our exit rental in March next year will be INR 3,600 crores, maybe slightly over that.

[Operator]

The next question is from the line of Kunal Lakhan from CLSA.

[Kunal Lakhan, Research Analyst]

So just a follow-up on the previous question. So is it safe to assume that our sustaining sales, excluding the AmEx going ahead, should be in the region of INR 400 crores, INR 450 crores with AmEx now done? So that's one. And then secondly, like obviously, the drivers for the sales would be your launch of new projects. So on the new launches, I wanted to understand that your launches will be open for sales as well in Q3 and Q4, or we just want to start construction in Q3 and Q4.

[Ashok Kumar Tyagi, Whole]

So Kunal, as we had mentioned even in the last call that we are now almost planning to open the sales or the presales virtually as soon as we commence construction and commence development, we don't need to necessarily wait for that. So answering your second question first, these launches will actually start locking into presales from Q3 onwards. But to your first point on what will be the sales run rate going forward. So while you are correct that excluding AmEx, the sales run rate last quarter was about INR 475 crores a sales booking. And we are targeting a number of about INR 750 crores a quarter plus for Q3 and Q4.

[Kunal Lakhan, Research Analyst]

Okay. That's helpful. Also on the time line of this -- the REIT that we are planning now. Where would -- which -- like when -- by when would you expect to launch or have a REIT portfolio of our commercial business?

[Ashok Kumar Tyagi, Whole]

So I mean, this is not only Kunal for you and for all the analysts, we have sort of started the entire process of getting Cyber City REIT ready. The reason we chose to disclose it in the presentation is only one, because as the entire process gets underway, there'll be appointment of advisers, et cetera, and word begins seeping out. So we did not want to be -- have anything which is even remotely under UPSA -- under, yes, UPSA. And hence, we thought we will disclose it. We are right now at the stage when we should, hopefully, within this quarter, appoint the initial advisers. And realistically, I think we'll have about a 15 to 18 months time line to get and structures Cyber City to be completely REIT ready. The actual time line of the REIT, frankly, will depend on the 2 shareholders, and I wouldn't want to comment on that right now. But we want structurally Cyber City to be REIT ready within a period of between 15 to 18 months from today.

[Kunal Lakhan, Research Analyst]

All right. And one last one, if I may. Just on the cash flow side. So since our construction is now getting back to -- it's 80% plus now and getting back to 100% level. And with the start of new construction or pickup in construction of the new launches, where do you see the cash flows settling? Do you think the positive cash flow trend that we've seen so far will sustain going ahead as well?

[Ashok Kumar Tyagi, Whole]

So you're right. So I think, one, we believe that the positive cash flow trend is likely to sustain. So that's really going to fund a part of the construction for the new product. Also, we are really now looking at doing the collections linked to the construction, right? So earlier, we were operating on build-to-sell model, but now we're really moving on to selling while during the construction. So that will help us in terms of faster conversion of cash.

[Vivek Anand, Group Chief Financial Officer]

So Kunal, maybe some minor mismatches aside, we anticipate most of the new projects to be self-sustaining from a cash flow basis in the initial quarter, and then obviously to start yielding the cash flow surfaces in the later quarters.

[Operator]

The next question is from the line of Murtuza Arsiwalla from Kotak Securities.

[Murtuza Turab Arsiwalla, Associate Director & Senior Analyst]

Just 2 questions from my side. One is on DLF main, the development company, can you tell us what are the project costs and CapEx that is still pending? And what is the quantum of assets? And second, just to be clear on the reconciliation of inventory, you've got the number come down to about INR 6,600 crore, and you said that INR 1,500 crore was because of the independent clause. What would be the EBITDA on that INR 1,500 crores approximately that would have been estimated in the previous quarters? And second is, what is the pending cost to complete the existing set of projects?

[Ashok Kumar Tyagi, Whole]

So the payable position as of 30th September, right, so we have INR 1,070 crores of payables, broadly payables, which includes both our construction projects and also CapEx included in it. So broadly, you can take a bifurcation of INR 800 crores and INR 300 crores. INR 800 crores for our ongoing projects and INR 300 crores for CapEx, right? So -- and in terms of this INR 1,500 crores, right, so we're possibly looking at an EBITDA of close to the one which we really removed from the inventory, approximately 50% is what I'll say, is the EBITDA, but these are approximate numbers. We can certainly share more details separately. Also, Murtuza, the INR 1,500 crores that has been removed for inventory as land will reappear in the new launches as independent flows at a number significantly higher than INR 1,500 crores.

[Murtuza Turab Arsiwalla, Associate Director & Senior Analyst]

Okay. Not [ different ] for the pricing. Also, INR 300 crores pending CapEx, what is the total project cost we are looking at? And what is the total area? And if you could just give us color which these projects are?

[Ashok Kumar Tyagi, Whole]

So this is basically Chennai and Noida projects, the 2 of them we have. So Chennai is 3 lakh square feet -- sorry, Noida is 3 lakh square feet and Chennai will be 4 lakh square feet broadly. That's what...

[Murtuza Turab Arsiwalla, Associate Director & Senior Analyst]

Okay. And what's the total project cost out here? What has already been incurred?

[Ashok Kumar Tyagi, Whole]

One doesn't have the exact numbers right now, but on 700,000 square feet, if you take about ballpark -- so I think maybe about a total of about INR 500-odd crores, of which INR 300 remains to be spent and INR 200 crores has been spent on. And for the record, the Chennai asset that Vivek alluded to is the asset that post completion will be transferred to Cyber City as per the existing agreements.

[Operator]

The next question is from the line of Abhinav Sinha from Jefferies.

[Abhinav Sinha, Equity Analyst]

Few questions. So firstly, on the Slide 5, which is the project pipeline on the floor. And you've also said that you're looking to launch another 12-odd million square feet in the next few -- 18 months to [indiscernible]. So can you give us an idea of what exactly are the launches we're looking for in 2Q when you mentioned the floors? And within this pipeline, the second question will be on the DLF Hines one, where you are saying that you have the approvals in place. But what exactly does the product look like?

[Ashok Kumar Tyagi, Whole]

Okay. So Abhinav, on the Hines front, it is 3.8 million square feet commercial development in a 2:1 ratio with Hines, [indiscernible]. So this obviously has now commenced, so the approvals have been received. The funding has been tied up with HDFC, and the construction is about to commence. This is a 3-year -- I mean 3 to 3.5-year construction cycle. After which, hopefully, the 2 partners will work for the opportune strategy to monetize it. On the other piece of this kind of residential projects that one is planning to launch in the next 12 to 18 months, I broadly subdivide them to 4 families, if you will. One is in the -- starting in the New Gurgaon sector. So in New Gurgaon, given all the government policies that have come in, basically, our family of launches will be essentially into 2 families. One will be plotted colonies in the, what you say, the mid-income or the value range. And b will be, again, low-rise to mid-rise developments, all again in the range of what we are broadly targeting a sub 75 lakh unit ticket size. We have identified 3 or 4 such launches, which, and I think, hopefully, the first of -- because unfortunately, all of these need environmental approval protocols apart from RERA. So I mean, we anticipate that the first of these launches should be in the market from Q1. And then hopefully, at the pace at which these can be absorbed, it should be good. We'll keep the regular supply of these launches turning in. I mean we have a significant amount of land in New Gurgaon, which lands itself to these pieces. So that is one entire segment. The second segment is in the main DLF City, as we call it. We have identified at least 2 major group housing developments, one about 2 million square feet and one about 4 million square feet. And neither of them is in DLF 5 just for the record. So DLF 5 is still something we are keeping up for later, which should be hopefully launched again in the next 18-odd months cycle. I think one of them should be coming in maybe 9 to 12 months from now and the second one may be 6 months or 8 months after that. Then we are also proposing 2 launches in non Gurgaon locations. And that, again, will happen hopefully sometime towards the later part of next year because those are still under planning. Apart from that, we are also proposing to launch some commercial developments, one of which is actually in DLF 5. And hopefully, 2 will be in Delhi, and 2 to 3 will be in New Gurgaon. And again, these launch -- the bulk of these launches would happen next year, starting Q1. So while, obviously -- and I think we'll still take some time to come with an actual project-wise time line for you. But I think from a broad standpoint, these are the 3 families of products, in addition to our continuing inventory sale in Camellias, which continues. But these are the 3 sort of families of products that we should have with selling continuing. This particular quarter, we are launching the independent floors in DLF Phase 3, which is the first of the independent floors that we are launching on our existing protect inventory. And for the initial phase of it, the response has been actually pretty overwhelming. And we are in the process of trying to handle the, if I may say, the mismatch between the number of units on offer and the demand that we have.

[Abhinav Sinha, Equity Analyst]

Okay. So that's good enough. So this response plus the confidence you are giving on lands, I think this takes several years. The market is looking good to you? Or what will you put it to?

[Ashok Kumar Tyagi, Whole]

Sorry, what were you saying? I missed the last part of the question.

[Abhinav Sinha, Equity Analyst]

So basically, I mean, the success of the new launches you're now talking about, plus the -- I think the launch pipeline is pretty large as compared to what we have seen in the last several years now. It is -- is it the market which is looking better? Or what exactly is behind this?

[Ashok Kumar Tyagi, Whole]

So it's a combination of 3 or 4 things, frankly. And I'll say the biggest reason being that all of us got 90 days in COVID to actually do nothing but think, frankly. So really, it's a -- it's clearly a pent-up demand from a New Gurgaon standpoint at products of a certain ticket size. So yes, I don't think that we are in the market for the 20 lakh product. But we do believe that we can make a product of the INR 60 to INR 75 lakh category, reasonably efficiently and profitably and bring them out in the market. The Gurgaon, the Haryana government has also been fairly proactive with some of the policy deviations that they require to give with some of those, and those have also happened in the last couple of quarters. In the DLF City, this entire thing of should we do independent floors on plots, has been something which has been actively engaging us for the last 18-odd months. And I think it was just a question of, at some stage, to take the plunge. So we took a cash plunge. And I mean the response to that has been extremely positive, as I mentioned. And so now we just feel more enthused and we have inventory of almost between 1.25 million to 1.5 million square feet of independent floor launches in the DLF Cities Phase 1 to 5, which is the heart of Gurgaon. Similarly, after -- I mean this is the fact that after Crest, we have not had a product in that -- in the premier luxury end of it. And so now on the one hand, we are launching Midtown in Delhi, which is the JV that we have with GIC of Singapore, and the Phase 1 of that should hopefully be launched in the next few months. And we are steadily that proposing -- we are concluding some of the land approval-related issues to 2 alternate locations in Gurgaon. And I think we should -- we also believe that the market is now beginning to get right for those products. And I think the first of those launches should again happen hopefully, 9 months from now. And so I think it's just that the market is now gradually beginning to clear up in our assessment. We'll obviously price these -- all of these products at price points, which would be aggressive and competitive, but clearly recognizing the locations, the location advantage that we have. But clearly, I mean, we will recognize the pricing environment that prevails today, and we'll launch them accordingly. So I think, yes, I think we just feel slightly more confident on this entire demand scenario and on our ability to execute. Also, Abhinav, our entire overhang of all of our existing construction commitments is now behind us, frankly. I think Camellias Club is about the last of the legacy construction commitments that we have. So frankly, I think now we believe that [indiscernible] 1 cycle done, and maybe there should have been overlap between the first and second cycle, okay, maybe our risk aversion led that to not happening. But now we are clearly in the zone for beginning the next massive big build-out cycle for both sales and leasing. I mean, as you know, the 2 Downtowns have commenced. The Hines joint venture we'll be commencing construction. So I think clearly, we are -- I mean we are looking back at some degree of optimism now for the future.

[Operator]

The next question is from the line of Abhishek Bhandari from Macquarie.

[Abhishek Bhandari, Analyst]

I have 3 questions, one for each one of you. Vivek, starting with you. You mentioned that you're going to get your debt cost reset with negotiations with the bank towards the end of this year, yielding 120 basis point cost savings. So what would be the absolute interest cost you're going to save? And do you think that now the interest rates being sold [indiscernible] urgency to reduce the debt on the [indiscernible] reduce from our side? That's to you. Ashok, sir, to you, you mentioned that there are certain things to be done on structuring the Cyber City for making it REIT ready. What are those steps that you need to do in terms of structuring that particular asset? And lastly, Sriram sir, if you could give the rental rates for the Chennai assets what you've recently reached out to the StanC company?

[Vivek Anand, Group Chief Financial Officer]

Yes. So if you really look at the gross debt we have across the group, that's upwards of close to INR 25,000 crores. And what we are really looking at is almost interest rate reduction of 120 basis points. So that's almost translating to INR 300 crores on an annualized basis. While you will not see the full impact of this year, but that's what our target is that by end of March, we should be able to bring down our overall interest cost by upwards of -- or close to 120 basis points.

[Ashok Kumar Tyagi, Whole]

Okay. On the REIT ready steps, Abhishek, basically, I think the -- I mean, all of you have seen the 2 REITs which have hit the market. I think the problems, the question and the issues confronting all REIT structuring is essentially the same. One is the entire structuring of the layering of companies below the REIT or above the REIT. So definitely one thing that we need to work along with the consultants to understand; b, will be the entire ratio of development versus rent-earning assets because, as you know, there's an 80-20 ratio that SEBI has put in. And the third, obviously, will be what is the most efficient and optimum stream of income that the REIT would eventually have to its unitholders. So I think all of these 3, frankly, will be big issues to be addressed individually, with the tax advisers, legal advisers and the bankers. And I think we are in almost, say, steps 0 of 100-step cycles. And I think -- but at least now we are past step 0, so we are beginning the foot count. And I think, hopefully, in the next few quarters, we should be able to make some degree of concrete progress on this.

[Sriram Khattar]

Yes. And a question on the rental for DLF Downtown Taramani, which we have got from Standard Charter. I'm sorry, but this is covered by the confidentiality clause, so I cannot disclose the rental, but suffice to say, it's about 15%, 16% more than the ongoing rates of our present DLF Cyber City in Manapakkam in Chennai.

[Abhishek Bhandari, Analyst]

Okay. Vivek, a follow-up to you. The question that is coming on the debt side. Now with the interest cost reducing significantly for us, do you think we have hit the plateau on the debt on the investment side? And we will not be looking really at material reductions on the cross set on the resi business going forward from here.

[Vivek Anand, Group Chief Financial Officer]

I think, Abhishek, I think last time also we've said that we will continue to hold our existing net debt level in the resi side of the business, at least during this year. There could be plus/minus INR 40 crores, INR 50 crores. But it will operate in a very narrow range, right? So that's the guidance, and we are holding on to that. At the same time, considering the size of the business and the balance sheet we have, we really don't see this as a concern going forward, right? So we are committed to really holding on. And possibly next year, we will certainly have plans to really bring it down.

[Ashok Kumar Tyagi, Whole]

Yes. So I mean, Abhishek, to just reiterate what Vivek said, we believe that the rent -- the net debt now is in a very comfortable zone. But obviously, we would like it to be lesser. And I think, hopefully, as all of these launches start hitting their cash surplus cycle, I think we will be able to reduce it even further. But it's not something which should honestly, today, cause any sleepless nights to anybody is honestly what I see. And now obviously, as Vivek rightly articulated, with the interest rate also going down almost quarter-by-quarter, even the P&L impact of this will keep on reducing over time. But yes, we are committed to the fact that we need to get it down even more.

[Operator]

The next question is from the line of Sameer Baisiwala from Morgan Stanley.

[Sameer Baisiwala, Executive Director]

Sir, questions on Slide 5. And here, if I look at the pipeline that you have talked about, so premiums luxury housing, the last item, I think the last quarter, it was 2.5 million square feet, gone up to now 8.5 million square feet. Can you just talk about this, where it is coming from? And the second question here is if I total up the entire commercial part, 3 million plus 2 million plus 3.5 million, so 8.5 million square feet. So I understand that the resi would be self-sustaining once launched. But what about this 8.5 million square feet. Would it not be required to do a lot of upfront CapEx? And so therefore, the current net debt may be at risk.

[Ashok Kumar Tyagi, Whole]

Okay. So the -- Sameer, the commercial piece, which is a 2 million square feet, is actually commercial for sale. So that should follow the same discipline that we have on the residential projects. So I mean, except that this is a commercial property, it follows the same discipline that we have for the residential projects in terms of being cash neutral in the initial phase and hopefully being cash surplus in the subsequent phases. The Hines JV is an SPV with its own ring-fenced funding with HDFC, as we had announced earlier. So again, that will not necessarily impact the group debt of DLF. The Noida IT Park, in all fairness, I take your point. So I mean, right now, all we are building in the Phase 1 is a 300,000 square feet deal that we had signed for a particular company for data centers, which should have a CapEx of about INR 120-odd crores. But yes, for Noida, we'll have to figure out what is the best strategy going forward, and should it be a combination of some sale and some CapEx build out so that the sale component is able to fund the CapEx build out required for the leasing component. So Noida is something we do need to think through. On the premier and luxury housing side, the 2.5 million that we had last time was basically one particular development in DLF City, Gurgaon. And now we have added one bigger development in DLF Gurgaon and one development each in Chennai and -- one development each in Chennai and Goa to be hopefully launched somewhere in the next 12 months.

[Sameer Baisiwala, Executive Director]

Okay. That's very clear. But sir, just coming back to the commercial point, on 8.5 million square feet. So is it fair to say that even though all of this is on sale model, but the sales commercial would happen only in the last 6 to 12 months before the completion, [ and just right for RentCo ].

[Ashok Kumar Tyagi, Whole]

So Sameerji, the 2 million of the commercial will not be on that discipline. This is basically a smaller sales. So the smaller strata sale. So this will be actually launched under a construction-linked payment plan. And I mean, if possible, we'll just try to ensure some more when some more money comes up upfront. The Hines JV will clearly be a heavy CapEx-intensive JV, for which the funding has been tied up. And Noida, myself mentioned that beyond the first 300,000 square feet, we ourselves need to figure out the right strategy. And I think it will be a combination of strata sale and CapEx build-out for leasing. I think it will be a combination of both. But yes, Noida IT Park, I do acknowledge that beyond the first 300,000 square feet, we ourselves need to fully flesh out. So that's the only piece in the in these lines where we do need to flesh out our thoughts even more. But clearly, Sriram and his team and our other teams are trying to figure out if we can get more deals in that rental space in Noida.

[Sameer Baisiwala, Executive Director]

Okay. Sir, my second part is relative to DCCDL, and I'm on Slide 29. Sir, if I'm not wrong, the -- you have completed 33 million square feet. But what you have for future development is roughly another 30 million square feet. But for last 2 or 3 presentations you've been showing 18 million. So why not include...

[Ashok Kumar Tyagi, Whole]

So Sameer, in this, the unbilled FSI that we have in Cyber City, Gurgaon is not added.

[Sameer Baisiwala, Executive Director]

And why is that so. And what's the development plant on that?

[Sriram Khattar]

So therefore, I think the idea is to bring DLF Downtown up to the first phase of 1.5 million, which we mentioned. And along with this and other tower of 1.7 million, which is right behind this, once that is completed, then we will go and start building down in Cyber City at that stage. See, the idea is that FSI is in the region of Gurgaon around Cyber City. And whether we build out Cyber City or we build off DLF Downtown, we will build out to the extent there is market demand and it can sustain it. And therefore, it is not that we just need to build it for the sake of doing so.

[Ashok Kumar Tyagi, Whole]

So Sameerji, if I may chip in. Basically, in Gurgaon, there's the Downtown [ Gur ] by 11 million square feet. There's the DLF Cyber City unbilled FSI of about 11 million or 12 million square feet. That is as far as Sriram is concerned. From an overall DLF standpoint, beyond this 23 million, we have the 4 million of the Hines JV and we have 3 million to 4 million square feet of -- which is of land -- which is owned by DLF itself. So totally, we are playing the eventual 30 million square feet development potential in Cyber City. And we'll obviously have to orchestrate it right to the degree that the market can absorb. So right now, Downtown is the project that we have launched. And hopefully, between Downtown and the other projects in Downtown is launched and the Hines JV has been launches. And hopefully, going forward, we'll keep on figuring out whether we first build out Downtown completely or, as Sriram said, build a part of Downtown, then start something in Cyber City and then come back to complete Downtown.

[Sameer Baisiwala, Executive Director]

Okay. Sir, one final question with your permission. And I'm looking at Slide 32 and 33. And there you show that you -- in DCCDL, that you have a positive cash flow, both operations and CapEx of INR 113 crores, but your net debt has still risen up by INR 215 crores. So just wanted to check why is this delta of roughly INR 330 crores?

[Vivek Anand, Group Chief Financial Officer]

Yes. So this delta is -- because of the final dividend that was paid in this particular quarter of about INR 270 crores. See, as an annuity company, our dividend payout is much higher than the non-annuity companies. And therefore, this year and last year, I think the normal dividend was paid was about INR 700-odd crores. And the last year, PAT was about INR 1,200-odd crores. And this INR 300 crores was the final dividend paid for the previous year.

[Ashok Kumar Tyagi, Whole]

Sameerji, but for the pandemic [indiscernible]. On a sustained basis, the broad plans that Sriram and I had, which was also discussed with GIC as well as our shareholders, is broadly that in a really healthy scenario, Cyber City should hopefully make between INR 1,600 crores to INR 2,000 crores of free cash flow, which should broadly be split half and half between CapEx and dividend payout. You're right that this quarter was a slightly stressed quarter, but this was a [indiscernible] dividend that we had counted in March, so Cyber City paid out. And I'm conflicted because I was the [indiscernible] of that dividend. But having said that, broadly, we do want to work with a 50-50 distribution of cash flow in Cyber City between their CapEx build out and their dividend.

[Operator]

The next question is from the line of Biplab Debbarma from Antique Stockbroking.

[Biplab Debbarma, Vice President]

Sir, first question is on the receivables. So last quarter, it was $22.75 billion, and it has interest to increase $4 billion this quarter. If my understanding is correct, all of your projects are completed projects. So why despite the good sales in this quarter, your receivable seems to be building up. I was expecting to -- receivables to go down further. So I'm just trying to understand is what is the mismatch in this.

[Vivek Anand, Group Chief Financial Officer]

Okay. So on a net basis, yes, you're right, we've added close to INR 80 crores to the receivables, and that's largely because our net sales during the quarter had generated some receivables, which was more than the collections what we had during the period. So the receivables from the net sales was close to INR 550 crores, and our net collections was close to INR 500 crores. That really, actually, was one of the reasons why the receivables went up. I would also like to really remind all of us that moving forward, right, as we are really looking at booking more and more new sales, this number is likely to really be moving more towards northwards, right? While we are committed to really collect our receivables and bring it down. But the receivables are likely to go up as we really move forward.

[Biplab Debbarma, Vice President]

Sir, then what will be the typical [ to post ] pay, for example? Just trying to understand. If you sell a unit in Camellia, say INR 50 crores, INR 60-odd crores, so what would be the time line by when you expect to collect the entire payment?

[Vivek Anand, Group Chief Financial Officer]

So it will be 6 to 9 months, for example, from the time you book the sales. So within 6 to 9 months, we should be able to really complete the transaction.

[Biplab Debbarma, Vice President]

So can you expect this $24 billion to be collected? Forget the new sales, just $24 billion to be collected in the next 6 to 12 months?

[Vivek Anand, Group Chief Financial Officer]

No. I think last time also I had given a guidance that between this year and next year, we'll be able to collect this receivable.

[Biplab Debbarma, Vice President]

Okay, okay, okay. That is good. And second thing is on the Downtown, Gurugram and Chennai, sir, my understanding is that we have a construction ongoing under -- these 2 projects are under construction. Just trying to understand to what extent you have incurred CapEx in these 2 projects. Or it is just the initial payment [indiscernible] in these 2 projects?

[Ashok Kumar Tyagi, Whole]

So between DLF Downtown Gurgaon and DLF Downtown, Chennai, the total spend is about INR 300 crores already. With a little over INR 200 crores being sent -- being spent on DLF Downtown Gurugram and about INR 60 crores to INR 80 crores spent at DLF Downturn, Chennai.

[Operator]

The next question is from the line of Manish Agrawal from JM Financial.

[Manish Agrawal, Research Analyst]

My first question is on the interest rates. So you have indicated that 7.5% is the target for DCCDL by FY '22. So this will be mainly fixed rate or floating rate we're talking about? You are looking to issue some NCD or how is it panning out?

[Ashok Kumar Tyagi, Whole]

So it's targeted to be -- you see most of our borrowings are by lease rental discounting, taken from either the large banks or from -- and they're all linked to a certain benchmark rate. So these are floating rates, but we believe that the next 1 year, 12 to 18 months, the rates will continue to be benign and may drop down a little more from what they are today. Basically, it's just a question of good treasury management and negotiation, where we have been able to successfully persuade our bankers to reduce the rates over the last 6 months, and we continue to do this. And we will reach this level by 31st March of next year.

[Vivek Anand, Group Chief Financial Officer]

Also, it sort of suits a long -- how CapEx-intensive rental business and annuity business. Some of our LRD actually have a 12- to 15-year horizon. So we're not picking up 24 to 36 months debt which may artificially come at a 15, 20 basis point lower rate also. We consciously are taking long-term debt, with the option of prepaying in case one has a certain cash inflow. But most of these are actually extremely long-term debts.

[Manish Agrawal, Research Analyst]

Okay. So my next question is on the completed inventory. So you have classified INR 1,500 crores completed inventory in Downtown Gurgaon. So this goes in premium housing projects, the table which you gave for developmental pipeline? Where exactly does it show up?

[Ashok Kumar Tyagi, Whole]

Yes, you are right. It goes into the premium housing. Yes.

[Manish Agrawal, Research Analyst]

And what is the value being considered instead of INR 1,500 now?

[Ashok Kumar Tyagi, Whole]

I'd say this will be margin accretive significantly.

[Vivek Anand, Group Chief Financial Officer]

Ballpark being at least 2.5 to 3x of this number.

[Operator]

The next question is from the line of from Parvez Akhtar from Edelweiss Securities.

[Parvez Akhtar Qazi, Equity Research Analyst]

[ Few ] questions from my side. First, obviously, leasing trajectory remains low across the country. So what is the outlook that we have on the rental rates in this business? And I'm talking about the other side. And on the mall that's now under opening and now we've got some small multiplexes, et cetera. So are there any negotiations that it will be concluded in the multiplex -- I mean, what is the progress in this?.

[Ashok Kumar Tyagi, Whole]

Yes. So on the rentals on the office side, the -- we have seen not dropped, though earlier last 2, 3 years, we were seeing growth in the rental rates every year. The rental growth do not seem to be there this year, but we are not seeing a drop in the rental rates. On the mall side, yes, it has been slow, but with the increase in footfalls, are looking up. And cinema halls, which has started recently, have had a very tepid start because of the -- still the psychosis and the people of entering an enclosed space on one side; And two, there has been no content because most of the new movies that were launched were launched on the OT platform and not on the visual movie platform. So post Diwali, when the new movies start coming in, we expect to see a better footfall.

[Operator]

The next question is from the line of Parikshit Kandpal from HDFC Securities.

[Parikshit D. Kandpal, Research Analyst]

So there was a transactional item which has been deposited in the P&L. So if you can just highlight on that.

[Ashok Kumar Tyagi, Whole]

Yes, that's the -- so there's an exceptional item of INR 96 crores, right, which is there recorded in this quarter. That's because of the interest on collections, wherever there is a deferment on collections on the residential business side, right? We have accrued interest in our books, right, and to expedite issue of position letters and to expedite collections, what we have really done is we've really taken a management call looking at the trends in the past 6 quarters because when we really look at the trends of the last 6 quarters, we've been able to only recover 25% of these delayed interest. So therefore, this quarter, as a matter of evident precaution, we really decided to really reverse 75% of [ DLR ] receivables, which we were having in our books as on 30th September.

[Parikshit D. Kandpal, Research Analyst]

This will keep pursuing quarter-on-quarter until such realization of collection happens.

[Ashok Kumar Tyagi, Whole]

So I think one thing we've really done is that we've stopped accruing this moving forward, and we will be accounting this on cash basis.

[Parikshit D. Kandpal, Research Analyst]

But just on the sales, as you didn't give a lead break-up of the INR 1,500 crores still coming in from each [ transit-- ] projects, the number looks really very high for thisquarter.

[Ashok Kumar Tyagi, Whole]

So the sales breakup, broadly, you're talking about the revenue booking for the quarter?

[Parikshit D. Kandpal, Research Analyst]

Yes, yes.

[Ashok Kumar Tyagi, Whole]

So broadly, the sales from the possession letters we've issued, close to INR 750 crores is coming from Camellias and the rest are from projects based in Gurgaon and across India. So that's almost adding up to INR 1,434 crores, then we have rental of INR 60 crores. And we have service maintenance and power income of INR 72 crores. Then we have our hospitality business, giving us INR 45 crores. And then interest and other income of close to INR 120 crores. That's add up to INR 1,723 crores for the quarter.

[Parikshit D. Kandpal, Research Analyst]

Is AmEx sales, which is in prepays mostly, this has this has not been recognized in the revenue of...

[Ashok Kumar Tyagi, Whole]

That will be recognized based on construction. So we've just started the construction during this quarter. So it has not been recognized.

[Operator]

The next question is from the line of Saurabh Kumar from JPMorgan.

[Saurabh S. Kumar, Senior Analyst]

Two questions. One is on this lease thing. Sir, I just want to understand, what is the rationale of doing this REIT? I mean because if you look at the other REITs which are traded in the market, the liquidity is very low. They can't lever up and the development pipeline is so low. I mean, DCCDL has a massive development pipeline, almost you will construct for the next 15 years. And then you have advantage of this debt as well. So is there some strategic rationale why DLF needs to hold this structure as a REIT? Or I'm just wondering where this thing is coming from. So I shouldn't -- and I have one follow-up on development.

[Ashok Kumar Tyagi, Whole]

So Saurabh, frankly -- I mean, a, of course, I have a claim that until we were not doing this, everybody used to say, "When are you launching a REIT?" Now that we're saying we want to start the project for REIT, now you're asking me the reverse question. But having said that, I think the reasons are -- so actually, you hit the nail on the head. What differentiates DCCDL from the existing REITs in the market or the to-be REITs in the market is the entire development pipeline. And I think to an earlier question raised in the call, our single biggest structuring issue will be how to handle that piece, and I think that's what we are still hoping that the investors will help us figure a solution out. Having said that, it has 2 or 3 obvious advantages. One is clearly that it at least puts a fair market traded value to the DLFs, at least the rent-earning assets. Right now, initially, everybody used to have their own loan Excel spreadsheets. Then I think, today, we are in a state where people derive the MSE, Mindspace evaluations, and project them on to DCCDL. This will hopefully give independent standalone rental stream.I think the REIT clearly allows the platform to grow and growth, both sort of organically and inorganically. By organically, I mean, it hopefully creates a structure and a mechanism for transfer of other rental assets in future once developed into the REIT within the dealer platform. And we, frankly, also look at go about acquiring other rental assets in the market and, hopefully, a traded noncash mechanism. Obviously, it creates a monetization road map If ever either of the 2 shareholders of DCCDL today wish to monetize a part of their shareholding, I mean, or not, frankly. But that, I still believe, is the tied issue to it and possibly the longest time line issue. But the first 2 is what we've been looking at. But you are right. The development pipeline of Cyber City is extraordinary. But do we sort of wait 8 years before we float a REIT? Or should we do it now? I think that is -- and it will depend on a lot of factors, including how the world is 18 to 24 months down the line in terms of the entire rental space, the entire cap rates, interest rates. We just thought let's try to clear out our own structure. Just say [Foreign Language] we have to ever do a REIT, then at least in a 4 to 6 month period, one can potentially start the process. So right now, it's just -- the readiness is the first phase because that itself will have its own challenges, which we'll have to negotiate.

[Saurabh S. Kumar, Senior Analyst]

Appreciate your input, sir. I just was wondering that the discount the REIT can have on their DLF stock because you have seen other conglomerate strata discounts. So that's because -- I mean the REIT is your matter -- I mean, the associated REIT is the cash engine of the company as of today. But fair point. Sir, the second point is essentially on this development pipeline, you have of INR 35,000 crores. effectively.

[Ashok Kumar Tyagi, Whole]

Sorry, Saurabh, we lost you.

[Operator]

We've lost the line for Mr. Saurabh. So we take the next question from the line of Kunal Lakhan from CLSA.

[Kunal Lakhan, Research Analyst]

Just wanted your comments on the recent news on the SEBI investigation on the [indiscernible].

[Ashok Kumar Tyagi, Whole]

Sure. So that actually is an easy one to answer. I mean, 2 disclosures first. A, this has nothing absolutely to do with the DCCDL-GIC joint venture. Absolutely nothing; and b, there was no information query action against the company, its KMPs all its directors. We had done, as some of you may recall, the residential JV with GIC -- back in 2015. And a good 6 to 9 months after it, somewhere in mid-16, SEBI received a complaint alleging some insider trading between some people who are working on the transaction, not necessarily in DLF alone, but in all the players. So between '16 to '18, the SEBI sought information from everybody, from the concerned parties to the transaction, the concerned legal firms, their partners, everything. We checked our own people who are involved in the transaction. We transparently gave the names to SEBI. And at the best of our information and based on our knowledge, none of them or their immediate in keen had indulged in any violative share trading. And I think we are pretty confident of our facts. I think almost on 2018 onwards, we haven't really stopped -- I mean had anything significant even from SEBI, except for whether 2 lay up their letters which have come in about 5, 6 months back. So we were very surprised when this news certainly broke up in a particular newspaper by a journalist who also had broken up a similar nonissue Office Supreme Court notice last year, which had caused some disquiet even at that time. But we have clarified, and I think, frankly, that is it. I mean, the newspaper, in a highly mischievous and irresponsible manner, also tried to draw insinuation that some of the DLF executives who have left had been -- had left in the cloud of this investigation. And nothing -- absolutely nothing can be farther from the truth. And I think it was an extremely, what should I say, weak attempt at trying to target the reputations of extremely strong professionals who used to work for DLF at some time.

[Kunal Lakhan, Research Analyst]

That's helpful, sir. Just one clarification. So what's the status on the investigation? Has that [indiscernible]?

[Ashok Kumar Tyagi, Whole]

No, no. SEBI, like some of the other getting investigating agencies, if they give a clean chit, they never tell you that they've doing a clean chit. Unless it actually goes into an education process. So none of this has ever even gone into an investigational education process. Only -- the only time SEBI gives a clean chit if they initiate edification proceedings against you. And at least we have never been given any information by SEBI of any education proceedings in this matter. So I mean, we are extremely clear. I mean that there was absolutely nothing by those executives, which remotely was violating of any insider trading or anything. And to the best of our knowledge, neither was anything substantive discovered against people who used to work for our law firms or the other party to the transaction. So I mean, I don't know what SEBI is doing or not doing. Frankly, I'm not privy to that. But clearly, there has been no adjudication, nothing of that sort so far on this.

[Operator]

Ladies and gentlemen, we take the last question from the line of Sameer Baisiwala from Morgan Stanley.

[Sameer Baisiwala, Executive Director]

Just a couple of questions. One is, how do we see the recognition of Camellia sales going forward? I understand there's INR 4,850 crores which is sold but not recognized. And second is, if you can just give us some insights into work-from-home0dynamics, your discussion with the largest occupiers. Are they looking to surrender some part of the space, not now over 1-, 2-, 3-year period? Just some color would be very useful.

[Ashok Kumar Tyagi, Whole]

So Camellias, I think clearly, we have close to 170 inventory as we speak. And so one, in terms of -- Okay, maybe I think it will be -- Sameer, can I request you just repeat the question on Camellias, please?

[Sameer Baisiwala, Executive Director]

Yes, sure. So you have recognized for the first time in September quarter, INR 700 crores-odd from camellia. What was already sold over the last few years? So what is sold but not recognized? INR 4,850 crores, INR 4,850 crores. So how do we see the recognition trajectory going forward? Just an accounting perspective, that's all.

[Ashok Kumar Tyagi, Whole]

Okay. So I think you can consider 5 to 6 quarters.

[Sameer Baisiwala, Executive Director]

Okay. Got it. Yes.

[Ashok Kumar Tyagi, Whole]

So if you need any more details, happy to take on separately offline.

[Vivek Anand, Group Chief Financial Officer]

Sameerji, these 5 to 6 quarters are, just for the record, the sales already done until September. Obviously, any news like the 11 sales done in September, we'll keep on adding to this number. But basically, all the sales that are being done now will have a far shorter time line to recognition than the older sales.

[Sameer Baisiwala, Executive Director]

Sir, the new sales will also require the buyer to do the fit-outs [indiscernible].

[Vivek Anand, Group Chief Financial Officer]

[indiscernible] But it cannot be a 5-year cycle. It could be a 18-month cycle. That's what I'm saying.

[Sameer Baisiwala, Executive Director]

Yes, exactly. Okay.

[Vivek Anand, Group Chief Financial Officer]

Sameer, your next question on the space takeup, et cetera. Let me mention a few things. One, what has happened in the last few months has been absolutely unprecedented in our lives. And I do not know, and I pray to god that we don't see it again. But having said that, there are 2 or 3 macro level points that I thought I'll share with you. One, India's competitive advantage has only improved because of this. I mean, India has the largest young English-speaking population who are reasonably good on technology and, therefore, are preferred in terms of either captives or back office spaces of large companies who want to sort of outsource, number one. Number two, India's cost competitiveness, both in terms of wages of these people and in terms of rentals, which average between $1 to $1.50 a month per square foot is extremely cost competitive. And therefore, in any sort of growth, business will come to India. In any sort of cost rationalization internationally, businesses will come to India. So I personally do not see any reduction in the volumes that will come once this psychological fear of the pandemic is behind us. Related to this, your specific question, are the large organizations looking at reducing space? Yes, we've seen a few of them sort of trim at the edges, but we have not seen any large space exit at all. In fact, our tenancies are quite stable. And two, our diversity of tenancy is such that we are able to absorb a 5%, 7%, 8% rationalization, which a few of the tenants have done.

[Operator]

Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Ashok Tyagi for closing comments.

[Ashok Kumar Tyagi, Whole]

Okay. So thank you all for again making it out on a Saturday evening. I think it was an extremely interactive call. As we said that, hopefully, this quarter should be, in some sense, the point signifying our returning to sort of more optimistic ways on the DevCo. And obviously, we're continuing with the strong journey on the RentCo. And I think some of the point plans that we have laid out in -- at a certain level in this quarter, hopefully, should start getting out more detail with every passing quarter. And look forward to meeting all of you. And, obviously, if any of you has further more detailed queries, you are most welcome to reach out to Vivek's team offline. Thank you. And happy Diwali to all of you.

[Sriram Khattar]

Thank you.

[Ashok Kumar Tyagi, Whole]

Thank you.

[Operator]

Thank you very much, sir.