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DLF issue fails to charm retail investors on Day 1

DLF issue fails to charm retail investors on Day 1
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First Published: Mon, Jun 11 2007. 09 04 AM IST

Updated: Tue, Jun 12 2007. 02 30 PM IST
New Delhi: A 10-minute walk from DLF Ltd’s swank headquarters on New Delhi’s Sansad Marg, 10-year-old Ajay is doling out the forms for India’s largest share sale.
“You can take the forms. They are free. Read it,” says Ajay, who goes by just that name.
Ajay has no idea that the blue forms lying between the newspapers he sells are key to DLF’s attempt to successfully raise about Rs9,625 crore from investors.
Along Delhi’s dusty, sweltering streets, newspaper hawkers are giving away application forms for DLF’s initial public offering (IPO) and subways are strewn with such forms.
Newspaper hawkers say they have been promised a commission of 1% on every share that is bought through the forms that they sell. That translates into a commission of Rs5-5.50 on every share that is bought.
“I know the company is DLF. It is a big company. People will buy it,” says Vikram, another newspaper hawker in Delhi’s business district.
Every form has a number on it, through which the bank identifies the hawker. “If someone buys a share through a form which has my number on it, I will get a commission,” says Sooraj, another 14-year-old newspaper hawker in Delhi’s Connaught Place.
In Gurgaon, the southern Delhi suburb that DLF helped build, it’s a problem of plenty. Forms are to be had almost everywhere and investors can fill them and submit them in the basement of the buildings the company erected.
But retail investors aren’t biting. Not just yet.
According to the National Stock Exchange website, DLF’s share offer is 78% subscribed, led mostly by institutional investors. So far, as per the exchange, none of the company’s employees have subscribed. Retail investors have offered to buy about 3.2%, or 1.7 million, of the 52 million shares on offer to them.
Dilip Katkar, a small-time sub-broker and a vendor of IPO forms on Dalal Street in Mumbai, where the Bombay Stock Exchange is located, says that investors have picked up around 1,000-1,200 DLF forms from his shop over the past week.
“Normally, on the first day of the public offer of a big issue, we get 100-120 applications, but for the DLF IPO we have got only 25 applications,” he says. However, according to him, the momentum will build and the most subscription will happen on the last day of the issue, as is traditionally the case for most share sales.
Katkar is more excited about the Rs100 crore share sale of Vishal Retail Ltd, which has a price band of Rs230-270. “I have heard that the grey market premium of Vishal Retail is Rs150-250, so there is higher possibility of listing gains in this,” he says.
Unlike DLF, Vishal’s offer, which also opened Monday, was only 4% subscribed, led completely by retail investors. Vishal, a discount chain, is selling only 4.7 million shares compared with the 175 million shares that DLF is offering. (The grey market premium for the DLF shares is now Rs27 from Rs40, brokers say.)
Archana Patel, branch manager of the Geojit Securities branch for women in the Mumbai suburb of Vile Parle, says that around 20-25 of her clients will look forward to invest in the IPO only on the last day of the IPO as they will first look at the oversubscription level in the qualified institutional buyers portion. The DLF IPO closes on 14 June.
However, high-networth individuals are bullish on the issue, say bankers familiar with the situation, but who did not wish to named. About 30% of the 175 million-share issue is meant for retail investors and 10% for such individuals.
High-networth investors, who usually borrow from banks to invest in IPOs, are borrowing heavily to invest in the DLF public offer, according to the same bankers.
As per market estimates, around Rs450 crore of funding orders were received by a single bank closely associated with the issue.
Nearly Rs6,000-7,000 crore of IPO financing is expected to take place for the issue. This gives an indication of the interest level among the high-networth individuals.
Vishal Thakkar, a 24-year old private sector employee, is quite bullish and says he will put in his bid for the DLF shares on Tuesday. While he usually invests in stocks with a short-term horizon, he is looking at this IPO from a long-term perspective.
Rajul Desai, an investor from Ahmedabad who lives on income from his stock market investments, says he will be staying away from the IPO as he isn’t sure about the valuation of the land bank of DLF. He is more keen on investing in Vishal Retail’s IPO.
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First Published: Mon, Jun 11 2007. 09 04 AM IST
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