4th February 2011 Fantastic Four- Series One: DLF Limited

Fantastic Four Stocks of India

SPECIAL EQUITY COVERAGE REPORT

These four stocks are probably most widely held by retail/HNI investors from the days of previous Bull Run in
anticipation that they will at least come back to the price at which they have invested in them. However, I strongly
believe that given their extremely weak fundamentals the chances of them coming back to their 2007 highs are quite
remote and market offers better investment opportunity than holding on to these Fantastic Fours (pun intended).

DLF is the first of the 4 stocks in my series of India’s Fantastic Four Stocks.

They also suffer a phenomenon called BASE EFFECT. DLF was around Rs. 1000 in January 2008 and now is at Rs
225, thus it’s a fall of around 77.5% in value. However, if I assume DLF to go back to the levels of Rs. 1000, then it
has to rise by over 350% and given its fundamentals and valuations the chances of DLF rising by over 350% even in 3-
4 years time frame is quite remote.

Moreover, these four stocks are most talked about 90% of analysts on all TV Channels and there exists a support and
resistance theory at every Rs 20-30 just trapping investors at every fall and compelling them to average more and
more.

Why DLF is a Fantastic Stock?

 Consolidated Sales have fallen from around Rs 14,500 crores in FY08 to Rs 7500 crores in FY10

 PAT has fallen from around Rs. 7,800 crs in FY08 to Rs. 1800 crs in FY10

 Despite Rs 7500 crs of Sales and Rs 1800 crs of PAT there has being a net cash outflow of Rs. 260 crores in
FY10

 Total Debt has increased from Rs. 12000 crs to Rs. 21,000 crs

 Total Share Capital has increased from around Rs. 1300 crs in FY08 to Rs. 6300 crs in FY10 despite an IPO in
FY2008

o Rs. 5000 crs of new share capital have being given to preference share holders thus, further reducing
the rights of common equity holders
o Investments have gone up from Rs 900 crs to Rs 5000 crs of which around Rs 4000 crores is invested
in money market and other mutual funds
o Loans and advances to subsidiaries and associates have increased substantially

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  BUY back announced in falling markets @ Rs.500/share in falling markets to support the stock price followed

ECONOMIC REPORT
by a QIP 3-4 months later

 Over 215 subsidiaries spread across India, high number of inter subsidiary transactions (including capital and
borrowings) and a regional auditor

 Stock Price Down from over Rs 1000/share in January 2008, to current levels of Rs 240/share and even below
its IPO price

 A sluggish real estate market in India both in terms of pricing and volume

 Higher interest rates would hurt the margins further and also impact the real estate demand in India

 A trailing twelve months P/E of around 23 with sluggish growth and increasing debt

In this Fantastic Four series you already know the first one i.e. DLF. The other 3 members of this team of Fantastic
Four will follow soon…

Happy Investing…!!!

Rahul Sonthalia

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 ECONOMIC REPORT
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