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DLF inflated asset base via dealings with DAL: Veritas

A report from investment bank Veritas Investment Research on DLF saw the stock tanking 5.17% in trade yesterday. The report alleges that the debt-laden property developer has been cooking its books for the last four years with large amounts of financial misreporting.

In an interview to CNBC-TV18, Neeraj Monga, the author of the report hammers DLF saying he doesn't buy the realtor's accounts. In his report titled 'A Crumbling Edifice', he raises doubts about the company's disclosed book equity and asset base.

You may read: Veritas aims gun at DLF; says co may have to recast loans

The Veritas report alleges DLF inflated sales by at least Rs 11,236 crore and profit before tax by Rs7,233 crore through its dealings with DLF Assets.

Below is an edited transcript. Watch the accompanying video.

Q: You say in your report that DLF inflated sales by Rs 11,000 crore and profits by Rs 7,000 crore plus since 2007. That's a serious allegation. How do you substantiate it?

A: It is our contention that the sales that were booked to DLF Assets Limited never had the cash flow or the wherewithal to pay for those sales and it is very clear that when the outstanding to DAL became questionable, DLF ended up merging DAL with itself through the DCCDL Caraf merger.

In that process, DLF took on approximately Rs 5,357 crore worth of debt and issued Rs 1,597 crore worth of preferred shares to promoters or management of the company. That suggests clearly that the sales were unsubstantiated or unsustainable. So all the profits we believe that were booked on the sales ultimately ended up being funded by the debt which accrued on DLF's balance sheet. It's as simple as that.



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