Real estate giant DLF Universal, which had planned to raise an estimated Rs 13,000 crore from the market by going public in what would have been the nation's biggest primary share issue, backtracked on its initial public offer (IPO) on Thursday, deciding to withdraw its prospectus and deferring the proposed issue. The official reason cited for DLF's withdrawal of the draft red herring prospectus (DRHP) is that the company wanted to update the document.
DLF's chairman KP Singh was expected to become a leading dollar billionaire on the strength of the IPO, thanks to his expected control of more than 85 percent of the company after its listing, but the issue's valuations raised eyebrows even as the stock market found its appetite for IPOs waning in the choppy mood since May. DLF, a pioneer in making Gurgaon a glamorous satellite city, would have raised a record amount if the issue had gone as planned. The only company which has raised more than Rs 10,000 crore through public issues so far is state-controlled Oil and Natural Gas Corporation, whose offer was to raise Rs 10,500 crore in March,2004.
“Due to some technical reasons, we have decided to withdraw the DRHP and would file the new one as soon as possible," a company official said.
The company was listed many years ago but had de-listed voluntarily. It decided to jump back into the capital market as the Indian economic growth story gained currency across the world and India eased up foreign investment in real estate. DLF had filed its DRHP in the first week of May and had planned to enter the capital market in June-July 2006. However, the Securities and Exchange Board of India (SEBI) did not clear the document following complaints from some existing shareholders who remained after the de-listing.
Investment banking sources said SEBI had referred the DLF issue to the Ministry of Company Affairs (MCA). The MCA has not given its opinion on the issues referred to it till now. “It is apparent that the company will have to resolve the matter before entering the market,” they added.
Meanwhile, the stock market's sharp correction since May adversely affected DLF's valuation, the sources said.
However, the company official clarified, “Given the substantive nature of positive developments since the filing of DRHP, we felt it imperative to update the DRHP with the new financials and developments.”
The company was planning to enter the market with 21.9 crore equity shares of Rs 2 each, including a greenshoe option of issuing an additional 1.7 crore equity shares. The pricing was planned to be decided by the book-building route that involves the fixation of price through bids. Investment banking sources said that they were planning to price the issues at above Rs 600 per share, giving a total valuation of over Rs 1,00,000 crore. The issue also includes the offer for sale of 1.49 crore equity shares from existing promoters.
Since May, shares of eight companies which entered the capital market are either trading below the offer price or around it, barring software firm Tech Mahindra.
Deccan Aviation is trading at Rs 85 against the offer price of Rs 148 per share, GMR Infrastructure is at Rs 215 against Rs 210. Tech Mahindra is at Rs 538 against the offer price of RsRs 365.