DLF Buzz Gets Louder

Ahead of its scheduled Rs 9,625 crore IPO, real estate king DLF is getting nosier and all the good news is starting to trickle in, which is a common practice, so as to keep the momentum going, develop more interest and media attention in the stock.

After hotels, SEZ, residential & commercial properties, DLF is venturing into healthcare with a joint venture with Ranbaxy promoted Fortis Healthcare. In the JV (to be named Fortis Specialty Hospitals), Fortis will have a majority holding with 74% stake and the rest 26% will be with DLF, and entail an investment of Rs. 6,200 crores. It would setup 200-450 bed hospital at cost of Rs. 200 crore each in 31 cities across India within 3 to 5 years. Each hospital would be built with a minimum built-up area of 20,000 sq. meters.

As per the JV, DLF will provide the land and oversee the construction of the proposed hospitals and Fortis will operate and manage the hospitals. The investment would be made towards cost of land, construction and medical equipment. The JV plans to build hospitals in cities where DLF has a presence. Fortis has recently raised Rs. 700 crores from its IPO, and operates 12 hospitals in north, including the Escorts Heart Institute and Research Centre (EIHRC), which is in news recently following resignation of Dr. Naresh Trehan.

The JV would be a win-win situation for both the companies, as it mark DLF’s foray into the healthcare segment and allows Fortis to become a pan-India player in the healthcare segment and resolve real estate problems for setting up new hospitals. It also enables DLF to expand its portfolio and also leverage on its tieup with US-based Prudential Insurance for life insurance products.

DLF is also planning a pan-India retail presence with 5 formats which include Neighbourhood Shopping Malls, Down Town Shopping District, Stand-Alone Stores, Shopping Centres, Destination Malls and Super Luxury Malls, for which it has secured 4.4crore sq ft of land, of which 1 crore square feet is under construction. Most of these stores would be situated in prime city centers and some destination malls are planned on the outskirts of major cities.

For retail investors (who can apply for shares worth maximum Rs. 1 lakh per application), DLF is offering the option to pay just Rs 27,000, and the balance Rs 73,000 will have to be paid post-allotment. However, the problem with this is that on listing, investors could not sell these partly-paid shares as they are not listed unlike the fully-paid shares thus depriving them of listing gains. For these shares to be sold, full payment would be made which would take around a month post allotment. The only silver lining is that if the issue gets highly over subscribed, then the retail investors would get full paid shares worth Rs. 27,000 or less, which could then be sold on listing.

The order book for $2.4 billion IPO is fully covered within few days of its roadshow. This shows the amount of interest the IPO is generating from retail investors, HNIs, and local & foreign institutional investors. The question on everybody’s mind is not whether the issue will be fully subscribed or not, but by how much times will it be oversubscribed. The grey market premium is rumored to be Rs. 30 per share. The issue is expected to generate interest more than that of Reliance Petroleum, which was the biggest IPO pre-DLF.