DLF to invest a third of IPO proceeds in land

Scales down earlier plan to invest Rs 6,500 cr under head.

DLF Ltd has said it would invest Rs 3,500 crore "" roughly a third of its planned initial public offering (IPO) "" in building up its land reserves. This is significantly lower than its earlier plan of investing Rs 6,500 crore for the purpose.

Announcing its plans here today, DLF said it hoped to raise Rs 9,625 crore through a public issue of 1.75 crore shares in the price band of Rs 500-550 between June 11 and 14.

The new shares on offer will constitute 10.27 per cent of DLF's post-sale capital. The share sale will give DLF a market value of as much as $24 billion, more than double Unitech's, India's biggest property developer.

The real estate major added that it can develop up to 575 million sq ft of real estate space on 10,255 acres (4,150 hectares) of land that it owns or has rights to in 31 cities. The company currently has 44 million sq feet of land under development.

Over half of its land (nearly 5,269 acres) is located in the National Capital Region, 2,708 acres in other major cities and 2,278 acres in the rest of the country.

The company said its current land reserves are sufficient for its planned developments over the next 10 years and provide it with a major competitive advantage, as well as protection against land price inflation.

"We aim to build up land reserves at competitive prices at strategic locations in the country, to gain from them during the upside in the economy," said DLF Vice-Chairman Rajiv Singh.

While DLF and its subsidiaries own 11.3 per cent of the land reserves, they have sole development rights for 44.6 per cent of the total.

They have agreements to purchase or letters of acceptance for 35.9 per cent of the land, while the rest are joint developments with partners, the company said.

DLF filed its first prospectus in May 2006, which it had to withdraw on account of regulatory objections in August, following complaints by minority shareholders. The company filed a renewed prospectus in January this year. The Delhi High Court recently cleared the issue.

DLF will foray into newer areas in the future, including airport management, financial services, asset management, leisure entertainment and hospital properties, among others.

"We may foray into newer areas if good opportunities are available at any point of time. We can also tie up with foreign partners for the ventures," Singh said.

DLF is promoted by billionaire Kushal Pal Singh, whose wealth doubled last year to $10 billion, according to Forbes. Singh, 75, a former Indian Army officer, bought land in Gurgaon, 17 miles (27 km) south of central New Delhi, in the early 1980s.

He developed Gurgaon as a significant suburb of the national capital, carving out residential plots and condominiums and commercial buildings that house offices and retail outlets.

Merrill Lynch and Kotak Mahindra Capital will manage the IPO, and Citigroup Inc, ICICI Securities, Lehman Brothers Securities, UBS AG, Deutsche Equities India and SBI Capital Markets will also be the sale arrangers.