In yet another legal blow to realty major DLF, the high court of Punjab and Haryana cancelled an earlier auction bagged by the company in August 2009.
>DLF shares tumbled 6 per cent in the morning to Rs 171 on news that 350.7 acres of prime land in Gurgaon on the Golf Course Road, acquired for Rs 1,703 crore, will be re-auctioned.
However, the judgment does not bring relief to the villagers who challenged the government’s decision of auctioning the land for commercial activities. The land was acquired from the local farmers for developing a recreational project for public purpose. The land is likely to be re-auctioned, within a month, as the court ruled that the auction was illegal on technical grounds. The technical issue is that the other bidders for the land were disqualified due to lack of expertise in developing golf course, enabling DLF to win the auction.
DLF is free to submit a new bid for the land on which no projects are currently being developed. But a higher price that is likely to be paid, if it wins the bid, may dent margins in future launches. The company’s net profit has been on a downtrend since the peak year of 2007-08. In the June quarter, net profit declined 29 per cent year-on-year to Rs 128 crore. The net profit was down 12 per cent for the fiscal year 2013-14.
Gurgaon, DLF’s main market, has been witnessing a slowdown in property sales. The company sold only 0.44 million sq. ft (msf) in its New Gurgaon project in 2013-14, as against its target of 2.5 msf per year. Pre-sales on its residential projects have been slackening and the management guidance continues to be cautious for the next 6-8 quarters.
DLF has been facing a slew of legal and regulatory hassles. The company was in the news last week when the Supreme Court directed DLF to deposit Rs 630 crore during the duration of the trial. DLF had filed an appeal against a May 2014 order from the Competition Appellate Tribunal (COMPAT) to pay Rs 630 crore as penalty for unfair trade practice. In another similar case filed by buyers, the Competition Commission of India had imposed a fine of Rs 2.4 crore in March 2014.
In June 2014, delivery of DLF Riverside luxury project in Kochi was put on hold, after the Kerala government cancelled a clearance. In February 2014, legal tussle led to the company forfeiting nearly a quarter of the ₹901 crore paid in 2007 to the Delhi Development Authority.