NEW DELHI: India’s biggest builder DLF has decided to outsource a large portion of its construction work to companies such as LT and Shapoorji Pallonji instead of doing it on its own, a top company executive said.
“We are concentrating on our core competency, which is real estate development. This needs to be distinguished from construction activity, which is handled by the sector specialists,” a top company executive said, requesting anonymity.
He pointed out that the company would continue to use its own construction team for projects that are low-construction intensity, and use them for overall project management of existing and new projects.
“For projects where construction intensity is high, we want to leverage the core strengths of the large construction majors.”
The new strategy would help the company scale up and improve the pace of execution of many projects where the construction activity is “intense”. It would also lead to better cash management, as the company – currently saddled with Rs 23,000 crore of gross debt – plans to become debt free in three years, the executive said.
The new strategy would help the company save on overheads as at least 350 persons currently employed with DLF would be redeployed at these construction firms once they start executing the contracts, said another executive who didn’t want to be named.
These people are employed with DLOR, a fully owned subsidiary of DLF. In 2010, DLF had bought out UK-based construction firm Laing O’Rourke’s 50% stake in an equal joint venture the two had set up in 2006 to execute various large projects of DLF. Laing O’Rourke, which has constructed the Dubai International Airport and London’s Millennium Tower, was to build DLF’s landmark projects, including the one in Mumbai’s Lower Parel, which is still to see the light of the day.
DLF had a total of 53 million sq ft of area under construction as of September 30, 2011. It has increased the pace of new launches in the second half of 2012 with a total of 7-8 million sq ft of new space. On October 2011, it launched group housing projects in Bangalore’s Rajapura area.
Last year, the company had said that it would focus on selling plots that offer higher margins rather than build mid-income, high-rise projects. Selling plots also means faster recovery of money for the company. In June last year, it had launched a 101-acre township project in Gurgaon that offered only 400 plots.
