DLF may fix price band at Rs 500-600 per share

MUMBAI: Billed to become the country’s most valuable real-estate developer, Kushal Pal Singh’s DLF Ltd is likely to make an announcement on the price band within 48 hours.

Reports flying about on Wednesday in the marketplace touted DLF offering a price band in a wide range of between Rs 500-Rs 600 per share. The public offer could fetch the real-estate developer, which owns 10,255 acres of prime land in some cities, about Rs 10,000 crore or upwards, thus making it the biggest-ever IPO in the country.  The real estate developer’s issue will easily beat the initial public offers by National Thermal Power Corp and Tata Consultancy Services Ltd.

DLF’s maiden offering will also perhaps vie with ICICI Bank’s follow-on offering as both are slated to raise funds by the second week of June. The two issues will suck out Rs 30,000 crore as they try and capitalise on the boom in the Indian economy.

Sources said on Wednesday that DLF and its merchant bankers were still internally grappling to reach a consensus on a price band that investors will find attractive enough to invest.  

“We expect to come up with a price band within two days. The board has yet to meet. Nothing has yet been finalised,” Rajiv Talwar, executive director, DLF, told DNA Money.

Reuters quoted unnamed sources when it said: “Bankers are talking about Rs 500-550 and the company wants close to Rs 600 a share.” DLF plans to sell 10.27% of the company, which could value it at about $20 billion, making it the most valuable listed real estate firm, ahead of its Delhi-based rival Unitech, which is valued at $11.3 billion.

BRICS Securities, in a recent report, has estimated the issue price of Rs 571 per share. “DLF wants to raise more than Rs 10,000 crore through an issue of 17.5 crore shares. We estimate an issue price of Rs 571 per share,” Brics said.

Will the two mega IPOs make the stock markets to wobble?

Ved Prakash Chaturvedi, MD, Tata Mutual Fund, believes otherwise. “It’s been blown out of proportion. We are a trillion-dollar market. And the money proposed to be raised is around 0.5% of the market. I don’t think it will have a major impact. Obviously, it’s a huge amount in a short period. It might have some impact on the liquidity. I don’t see any long term impact,” the fund manager said.

Vikas Khemani, co-head, institutional equities, Edelweiss Capital, concurs with this view. “It will attract fresh investment into the market. It all depends on what valuation they come out with. If the valuations are attractive, then you will see fresh money coming in. Liquidity will not be hit,” Khemani declared.

ICICI Bank had recently filed an application with Sebi for a $5 billion public issue, a large part of it to be raised domestically. This is expected to come up against the mega DLF offering, which is probably making its third attempt to raise funds.

Marketmen are certain that, come June, the markets will hardly be tested even as funds are shovelled into the two new offerings. Manish Sonthalia, vice-president, equity strategy, Motilal Oswal Securities, also believes that “domestic liquidity will not be affected to a huge extent. I think a large part of the Rs 30,000 crore will be subscribed by foreign institutional investors. The total amount to be raised for the two offerings is Rs 13,000 crore for DLF and Rs 17,500 crore for ICICI Bank .”

Even if it falls, it would fall for other reasons, alludes Sonthalia. “Given the present liquidity, if the markets were to fall, they may fall due to different fundamental factors.”

As per the new Draft Red Herring Prospectus (DRHP), Rs 6,500 crore will be used for land acquisition and Rs 3,493 crore will be deployed in existing projects. DLF has also scrapped the greenshoe option in the current prospectus

“Bankers are talking about Rs 500-550 and the company wants close to Rs 600 a share,” the source said. DLF plans to sell 10.27% of the company, which could value it at about $20 billion, making it the most valuable listed real estate firm ahead of its Delhi-based rival Unitech, which is valued at $11.3 billion.

Merrill Lynch & Co and Kotak Mahindra Capital Co will manage the sale. Citigroup Inc, ICICI Securities Ltd, Lehman Brothers Securities Ltd, UBS AG, Deutsche Equities India Pvt and SBI Capital Markets Ltd will also participate.