Real estate giant DLF Universal is set to enter the Indian stock market with the largest-ever initial public offer of over Rs 10,000 crore. The company received clearance from the Securities and Exchange Board of India (SEBI) on Monday for its IPO of 175 million equity shares, which is expected in June. DLF’s listing will carry it into the premium Rs 1,00,000 crore market capitalisation club.
Despite the severe beating, reality stocks have taken in the secondary market, the price band for the DLF issue was expected to be between Rs 550 and Rs 600 a share, said an investment banker on the condition of anonymity. As the face value of the equity is Rs 2, according to SEBI guidelines, the issue cannot be priced less than Rs 500 a share. “Since the minimum price cannot be below Rs 500, the price band is expected to be at around Rs 550-600, and the final price could be at the upper limit,” said the banker.
At this price, DLF’s market capitalisation is expected to be around Rs 1,05,00 crore, equivalent to $25 billion, which will place the company at seventh position in market capitalisation rankings.
After the IPO, DLF Universal’s promoter KP Singh will be among the richest Indians--he will continue to own 87.5 per cent stake in the company. The proposed issue of 175 million shares is 10 per cent of the expanded paid-up capital of DLF. If DLF is valued at around Rs 1,05,000 crore, Singh’s wealth will be in the region of Rs 91,000 crore, or $22 billion. Minority shareholders own around 2.5 per cent of the company.
At around Rs 600 a share, DLF’s valuation will be three times that of Unitech, which is valued at Rs 35,000 crore, down from its all-time high market capitalisation of Rs 41,000 crore.
The SEBI approval paves the way for the company to tap the capital market nearly a year after it first filed a draft prospectus in May 2006, which it subsequently withdrew in August. Due to a big correction in reality stocks earlier this year, the company reduced the size of the issue. In the first draft prospectus, it had offered 202 million shares and a greenshoe option for 17 million more to raise around Rs 13,000-14,000 crore. The revised offer puts 175 million shares on the table.
A DLF executive claimed the Reserve Bank of India had allowed foreign institutional investors (FIIs) to invest in the company’s IPO, and the real estate major was expecting good response from institutional investors, including mutual funds, banks and insurance companies. Depending upon the success of the DLF issue, investment bankers said, another realty company, Omaxe, could enter the market.