DLF – Will it be third time lucky?

Delhi Land and Finance (commonly known as DLF) has been amongst the most unlucky capitalist in the market. First, it had a conflict with its minority shareholders over the issue of debenture and stock-split, then as soon it filed its draft prospectus with SEBI in May 2006, the markets witnessed the worst crash in recent times. So, the company didn’t go for the planned IPO as it wasn’t sure of the issue being fully subscribed. After another failed attempt in November, 2006, the company has for the third time filed the prospectus and the issue will open from June 11-14, 2007 with a price band of around Rs. 500-550 per share.

DLF plans to raise $2billion for a 10.27% stake (making it biggest IPO ever). The company has a huge landbank of 10,225 acres and a developable area of 574 million sq. ft., of this around half is around Gurgaon and 23% in Kolkata. DLF plans for developing 4 SEZ in Gurgaon, Amritsar, Chennai and Pune. It has also tied with Hilton for hotel development, expanding chain of multiplexes under DT cinemas and formed a JV for insurance with Prudential Financial Inc.

DLF may benefit this time as equity markets are at an all time high inspite of correcting twice since it first filed the RHP, also during this period the property prices have risen around 30-40% in key areas. The company’s positive factor is it’s presence in prime locations in Delhi and Mumbai, which may grant it premium in valuation.

However, there are certain downsides too, as the company is into super-luxury apartments, which has low demand, and concentration on Gurgaon would act negatively for the company as it may be affected by stagnating demand, change in regulations, taxes, natural calamity and any social or political development. The WB project also faces uncertainty due to controversies on land acquisition.

Apart from this, there are certain macro factors risk associated, for details, read our previous article on real estate bubble.

But one thing is for sure, if the issue manages to subscribe fully, then it will make KP Singh one of the richest Indians on planet.