DLF IPO gets Sebi nod, to hit market in a month

The company will raise Rs 13,600 crore by diluting 10.27% equity.

Four months after DLF Ltd filed a revised draft to raise around Rs 13,600 crore from the primary market, the Securities and Exchange Board of India (Sebi) today cleared the company's initial public offer (IPO) for offloading 10.27 per cent of its shares.

The issue, which would be book-built, could hit the market in four weeks, though the exact timing would be decided after company executives met their merchant bankers later this week, a company source said. "The fact that investors in the US and Europe are usually on holiday in July and August has to be factored in," he said.

He added that the price band was likely to be finalised in two weeks. "If we look to raise Rs 13,600 crore, the price band will be around Rs 825. However, in our filings, our stated aim is to raise more than Rs 10,000 crore. If we stick to that target, the price band will be around Rs 600," he said.

Against the 202 million equity shares of Rs 2 each that DLF had offered in April 2006 in its first prospectus, the company is now offering 175 million shares at the same value, with a greenshoe option (which allows companies to retain a part of the oversubscription).

The reduction in the number of shares on offer is because DLF promoter KP Singh (India's fifth richest billionaire) and his family are not selling their shares.

Sources said DLF could expect to raise around Rs 13,600 crore from fewer shares because it had "grown as a company, its valuation has gone up and its land bank has increased 2.5 times". DLF has acquired land in Delhi, Ludhiana, Jalandhar, Bhopal, Indore, Chennai and Maharashtra.

After the issue, the share of KP Singh and his family in DLF will be approximately 87.5 per cent, which will amount to nearly Rs 1,15,019.45 crore. According to the previous filing, the notional value of the holding in the hands of KP Singh and his son Rajiv Singh was Rs 92,899 crore. Minority shareholders in the company hold the remaining shares.

Experts said the timing of the issue would not be affected by the ongoing decline in the real estate sector. Between January 2007 and mid-April, 19 listed real estate firms saw their peak market capitalisation erode by over 20 per cent. However, this trend seems to have been arrested and some stocks are staging minor recoveries.

"The real estate frenzy is over. Investors can expect a good pricing... DLF's IPO will create a benchmark for other realty companies and encourage them to enter the capital markets, thereby improving the transparency of the sector," said Prithvi Haldea of PrimeDatabase.

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SUCH A LONG JOURNEY
(A brief history of DLF's IPO)

April 2006 Files prospectus with Sebi for Rs 13,600 crore

Sept 2006 Withdraws prospectus amidst minority shareholder objections

Nov 2006 Resolves issue with minority shareholders

Jan 2007 Files revised prospectus with Sebi, reduces offer size, keeps issue mop-up same, declares larger land bank of 10,255 acres

May 2007 Sebi approves IPO, issue expected in four weeks

FINANCIALS
(For the nine months ended December 31, 2006)

Consolidated total income: Rs 3,541.1 crore

Consolidated net profit: Rs 1,898.1 crore*

Land reserves: 10,255 acres

Aggregate estimated developable area: Approx 574 mn sq ft (46 mn sq feet under construction, excluding joint venture partners' share)
*Includes the sale of certain commercial properties to group company DLF Assets