Value investor- India mid & small caps

Bhaskar Chakraborty

Thematic (Sector/Industry)

<ul><li>New accounting norm on revenue recognition forces developers to shift from percentage completion to project completion</li><li>This increases volatility in revenue recognition in P&amp;L while giving no information on project profitability and true sense of cashflow from operations for a developer</li><li><a href="https://www.smartkarma.com/entities/11106" target="_blank" data-smartkarma-citation="entities:11106:1">Dlf Ltd (DLFU IN)</a> treats entire Phase V- Gurgaon as one project for revenue recognition purposes. This helped it to accrue large amounts of floor space index/floor area ratio (FSI/FAR) as the Delhi metro stretched further into DLF City. Now, it can’t recognize any revenues from its ongoing projects till all developments in entire Phase V are completed. This could easily take a decade. We expect sharp drop off in reported revenues and profits FY19 onwards.</li></ul>

New accounting norm on revenue recognition forces developers to shift from percentage completion to project completionThis increases volatility in revenue recognition in P&amp;L while giving no information on project profitability and true sense of cashflow from operations for a developerDlf Ltd (DLFU IN) treats entire Phase V- Gurgaon as one project for revenue recognition purposes. This helped it to accrue large amounts of floor space index/floor area ratio (FSI/FAR) as the Delhi metro stretched further into DLF City. Now, it can’t recognize any revenues from its ongoing projects till all developments in entire Phase V are completed. This could easily take a decade. We expect sharp drop off in reported revenues and profits FY19 onwards.

India Real Estate: New Accounting Norms Pose Major Dilemma for DLF

India

Sunteck Realty Ltd. develops real estate.

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Sunteck Realty (SRIN IN)

India Real Estate: New Accounting Norms Pose Major Dilemma for DLF

New accounting norm on revenue recognition forces developers to shift from percentage completion to project completion This increases volatility...

Bhaskar Chakraborty

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