DLF files for Rs 13,600 cr IPO

DLF Universal Ltd, which filed a draft red herring prospectus for its initial public offer with the Securities and Exchange Board of India today, aims to raise Rs 13,600 crore by issuing 202 million equity shares, each having a face value of Rs 2. The shares will be offered at a premium to be decided through a 100 per cent book building process.

This will be the biggest IPO ever in India, comfortably overtaking the TCS float of Rs 5,000 crore in August 2004.

The issue, if the green shoe option is exercised, will constitute 12.77 per cent of the fully diluted post-issue capital of the company. That will leave about 87 per cent equity under the control of DLF Chairman KP Singh and his son, DLF Vice-Chairman Rajiv Singh.

If the company is able to raise the money from the market, its total value will be pegged at Rs 106,499 crore. The notional value of the holding in the hands of the father and the son will be Rs 92,899 crore, or about $20 billion, placing them second in the list of the richest Indians, just behind Mittal Steel Chairman LN Mittal.

"Notional is a good word. We are looking to create an institution, one that will take its rightful place not only in India but internationally," said Rajiv Singh. The company's balance sheet includes Rs 848.9 crore of "goodwill" in 2006, up from Rs 52.2 crore in 2005.

Of the targeted amount, the company intends to spend Rs 6,500 crore on land acquisition, Rs 3,100 crore on development and construction of existing projects, and Rs 4,000 crore on prepayment of loans.

Of the amount intended for land purchases, Singh said only a "small portion" would flow into special economic zones. "Most of it will be on homes, offices and retail," he said.

The company has said in the prospectus that its has identified 62 cities for development of various projects. Until April 30, 2006, DLF Universal made partial payments to acquire 2,893 acres of land across the country.

All told, the company is evaluating residential, commercial and retail space projects of over 118 million sq feet in the country. Real estate consultants have valued DLF's land bank at Rs 100,000 crore.

The company has said in the prospectus that it is adopting a new business model, based on the development and sale of commercial and retail properties. Earlier, it developed and leased properties. It believes the new model will protect it from steep declines in asset values as a result of market conditions.

In the IPO, the company proposes to reserve 200,000 equity shares for allotment to employees. Of the rest, at least 60 per cent will be allotted to qualified institutional buyers, not less than 10 per cent to non-institutional investors and not less than 30 per cent to retail investors.

Kotak Mahindra Capital Company and DSP Merrill Lynch are the global coordinators and book running lead managers to the issue.