If all goes well, DLF’s market capitalisation is expected to be around Rs 1,05,00 crore, equivalent to $25 billion, which will place DLF at seventh position in market capitalization rankings in the world. And after the IPO, DLF Universal’s promoter KP Singh will be among the richest Indians.
The approval, which will make a way for the DLF plan to put its fist on the capital market. It is worthwhile to mention here that the company had filed a new prospectus in January this year after its first attempt came to a stand still due to certain objections over the complaints by the minority shareholders'.
DLF owned by KP Singh proposes to enter the capital market with a public issue of 17.5 crore equity shares of Rs 2 each. The post-issue dilution would be over 10% of the equity capital of DLF. While he will continue to own 87.5 per cent stake in the company. "The company could raise more than or equal to Rs 13,600 crore," a company official had said in January. The fund would be deployed to meet construction cost, land acquisition and repayment of debt.
When asked when the issue would open, the company official said: "We are on the job." Merchant bankers, however, said it would take at least a month as the issue size is big. In its second attempt, the DLF plans to raise about Rs 13,600 crore but with lesser shares being offered through the IPO, reflecting the company's increased valuation over last year. DLF last year, proposed to offer 20.2 crore-equity shares, but the prospectus containing that offer was withdrawn.
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.
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.
DLF will use its IPO proceeds in part to acquire land, complete on going projects and retire debts. The company's vice chairman Rajiv Singh says that land acquisition programme will cost Rs 6,500 crore (Rs 65 billion), while the completion of on-going projects will cost about Rs 3,100 crore (Rs 31 billion). The company, at present, has loans worth Rs 4,000 crore (Rs 40 billion).
DLF Vice Chairman Rajiv Singh said that the IPO proceeds will be utilized for land acquisition, which will cost about Rs 6,500 crore and the DLF hopes to complete the construction of some on-going projects, which will take about Rs 3100 crore within a few months from now.
Singh further said that DLF retains the rights to prepay loans that the company holds to the extent of about Rs 4,000 crore. This is an overall statement of objectives. It will be decided after the exact issue size is finalized. The deployment will be decided thereafter. Principally the money is for acquisition and for completion of our projects.
When asked about the Special Economic Zones three special economic zones, which are multi-product ones in Ludhiana, Amritsar and Manesar, Singh said that. DLF have received approval to set up four special economic zones of a very large size. Three are going to be a multi purpose special economic zone and one is going to be a collection of product specific zones in Amritsar.
According to Singh, as far as the investment programme goes, no exact number is quantified as yet. The land acquisition proceedings still need to take place. DLF do estimate the total investments processing would be of Rs 40,000-50,000 crore (Rs 400-500 billion). But DLF's investment in this would be restricted to much smaller amount, which will be known after the projects are specifically conceptualized.
The start is due in Amritsar not in Ludhiana. Amrtisar is the first one, which will get off the block. We do hope that we will be able to start something physically on the ground in a few months time. We should be up and running in terms of marketing.
The DLF is also targeting 100-125 hotels in the next five-eight years while some in the next few months. But Vijay Singh declined to comment on them and said that future forecast at this juncture in an IPO process is something business hotels should be the first ones to take off. But said that substantial sites for the location of such hotels. As and when our partnership gets finalized, we will implement these projects rapidly. Some of them are going to be independent sites and many of them are going to be co-located with the other development projects of the company, whether in retail space or in IT park space.
Singh further added that there has been some kind of trouble between the Delhi Development Authority as well as the Delhi high court regarding the joint venture of the company with Indiabulls which is just a co-investment into a particular project.
When asked about the Foreign Investment Promotion Board (FIPB) clearance for the FIIs to come into the pre-IPO placement, Singh said that in pre-IPO placement, we are not contemplating any FIIs. The pre-IPO placement will only be for the domestic investors and institutions. We may be able to give you some details about this in a few days time. Only one thing I can say is, unfortunately, we are constrained in terms of making a projection at this moment in the IPO process.
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