DLF IPO's will hit market soon
Hopes of DLF IPO hitting the market soon have been revived after the management made presentation to potential institutional investors in Mumbai on Thursday. “To asses the potential price band, the company made a presentation to LIC, GIC and several mutual funds and other institutional investors,” a source said.
DLF is awaiting SEBI approval for the revised prospectus it filed on January 4. There have been no indication on the issue pricing so far and the latest research report of Macquaire Research on India Property has pointed out the hitch DLF might face on issue pricing.As per the SEBI circular dated May 28, 2004 any company with a par value of less than Rs 10 cannot price it below Rs 500. “This circular reduces DLF's flexibility to price below Rs500 unless it wants to restructure its share capital once again. Also it has the option of valuing the company at $19.2bn without any capital restructuring,” says Macquarie report.
The par value of DLF shares at present is Rs 2 and it has proposed to raise 175,000,000 (17.5 cr) shares. Sources say DLF had paid fees to SEBI based on an issue size of Rs 6000 adding to the speculation about the issue size and price. As the company can always go back and pay additional fees in case the size of the issue is higher, issue size of over Rs 8000 cr as per the Rs 500 or above a share cannot be ruled out.
Comparing the current prospectus with the earlier one, Macquaire observes that DLF’s land bank as well debt levels have doubled and there are no land valuations in the offer document. The DRHP filed in May, it carried valuations by independent agencies – Cushman & Wakefield value of Rs 77,450 cr to Rs 85,000 cr and Jones Lang LaSalle at Rs 85,000 cr for 4,265 acres. The land bank stands at 10,255 acres as per the new prospectus and the debt has grown from Rs 4130 cr in FY 06 to Rs 9450 cr as of November 2006.
The size of the issue too stands reduce as per the current prospectus from 202 million shares to 175 million shares. The promoter and promoter group’s offer for sale has also been withdrawn. In the interim period, the company had inked joint venture with US based hospitality firm Hilton for a few of its hotels and also announced expansion of multiplex cinemas.
Net profit of the company for eight-month period ended November 2006 stood at Rs 1830 cr as against Rs 1150 cr for the financial year 2006. “This is mainly due to one-time sale of commercial assets from DLF to DLF Assets Ltd which accounted for Rs 2160 cr and Rs 1740 cr in revenue and profit before tax respectively,” says Macquaire report.