FIIs power DLF oversubscription

Foreign investors seem to have ignored warning signals on real-estate by placing bids for over Rs 10,000 crore for the mega initial share offer by Delhi property developer DLF Ltd.

This is more than the total initial public offering (IPO) size of Rs 9,625 crore at the upper price band of Rs 550 per share.

The IPO for 175 million shares was oversubscribed 1.28 times at 5 pm today. There are two more days to go for the issue close.

The retail portion, however, is yet to gather speed, being subscribed only 0.101 time.

Data available with the National Stock Exchange shows that foreign institutional investors (FIIs) have placed bids for 198.7 million, out of the 104.44 million shares reserved for qualified institutional buyers (QIBs).

In fact, the bids by FIIs are higher than the total size of 175 million. At the lower price band of Rs 500, the FIIs bids are valued at Rs 9,935 crore.

"Foreign investors have been putting money into the country's realty sector. The valuation and risk associated with DLF will be more or less similar to that with the Sensex and the Nifty," said Arun Kejriwal of Cris Research.

For foreign investors, DLF will be one of the few stocks that they relate with the future of their investments in a specific market, he said, adding, "That's the reason it has attracted big foreign investment".

The Qualified Institutional Buyers (QIBs) portion, which forms 60 per cent of the IPO, was oversubscribed over two times.

Unconfirmed reports said a few global investors are believed to have placed bids worth $1 billion and most of the inflows have come in the form of participatory notes. Overseas funds investing in India have also put a large number of bids for the issue.

DLF is expected to join Futures and Options (F&O) trading on its listing. The upper band of the IPO values the company at $23 billion, which will be more than double the market valuation of Unitech, the current top real-estate firm by this measure.

"The realty sector is facing a few issues. But, there is no reduction in foreigners interest in this sector. Real estate is a significant asset class. Foreign players want to broaden their exposures to this sector," Avinash Narvekar, partner, Ernst & Young said.