Lot of stuff has been said about DLF in the last week.
Veritas, in its research report casted strong doubts over DLF’s accounting
practices and its dealings with DAL (DLF Assets Limited). Year after year, DLF
showed a large chunk of its sales to DAL without getting paid for it. So in
effect, DLF on its books showed property sales to DAL on one side and showed
receivables of almost full amount from DAL on the other side for balancing. From
FY07 to FY11, through this accounting practice DLF inflated its Sales by Rs
11236 Crores and Profits by Rs 7233 Crores. After doing so for many years
without any payment from DAL, it merged DAL with itself in 2011.
DAL is a DLF Promoters company and its merger with DLF was
done at ridiculous valuations. This is cheating in most open terms but allowed
very well by Indian laws. This is why I do not like fundamentals as all these
years DLF books showed good topline and bottomline growth. Balance Sheets and
P&L Accounts hide much more that they reveal and only after careful
scrutiny you can find loop holes which have been exploited by these companies.
Many a times, even trained persons fail to spot these irregularities (remember
Satyam) then what are the odds for lesser mortals like you and me here.
Well, Price and Volume data does not lie (in most non-penny
stock cases) and fortunately for us it is not in the hands of these companies
to publish it. So let’s look at the chart now…
Chart is no good and does not help much. All moving averages
are beyond reach of the price as of now and they are drooping too. MACD or RSI
are not inspiring any confidence at the moment either.
First level which can be called as some support is around
171-175 for DLF. It is created by the lower trendline as well as it is the same
level from where stock has rebounded twice/ thrice in last six months. Rs 100
valuation as created by Veritas will also acts as mind magnet for various players.
Veritas has couple of success stories backing them up (Kingfisher, Reliance
Communication, etc) where they identified the cancer in early stage and that
will play at the back of mind of any person dealing with DLF. The inquiry
initiated against DLF by Ministry of Corporate Affairs (MCA) if done correctly,
will very well decide what lies ahead for this Script (Life Milegi ya Tawe pe
fry hoga).
Fundamentally I have some unidentified allergy with real
estate sector and I believe that ethical behaviour and real estate sector do
not (or cannot) go hand in hand. This applies to ‘one of project builder’ to ‘big
blue chip NIFTY component companies’ alike. Now this kind of business practices
can get you to top very fast but cannot sustain you there for long. Real Estate
sector in India is not plagued by rising input (Cement, Steel) costs or by
non-availability of labour. What stops it by realising its true potential is widespread
malpractices across the breadth and width of entire sector. Too much political
interference, bad brokers, crooked builders, one sided agreements, non-fathomable
(to layman) beaurocracy and greedy investors are some of the factors which
keeps the general public away from real estate. The scene is so bad that the
real pain for a person starts after he books a flat which actually should be a
point where he should starts to relax.
Bad and heart breaking stories are too many to ignore in
this space and I personally do not like them. Hence I do not get in to real
estate stocks for these (foolish as they may sound) reasons.
Technically too, there is nothing positive in the charts so
as of now it is ‘stay away’ in my deeds as well as advice too.
Happy Trading.
Disclosure: No Positions at all.
Disclosure: No Positions at all.
