Mumbai: DLF Ltd, the real estate developer that is set to make its debut on Indian bourses on Thursday, could list at a 10-15% premium on its offer price, according to equity brokers and investment bankers, and the scrip could join the Bombay Stock Exchange’s 30-stock benchmark index, Sensex, in the October-December quarter of this year, maybe even sooner.
The developer’s sale of 1.75 million shares closed on 14 June and was subscribed 3.4 times, which means bids were received for 3.4 times 1.75 million, or 5.95 million shares. Of this, qualified institutional buyers (QIBs), essentially banks and financial institutions, bid for 5.1 times the number of shares on offer to them while retail investors fully subscribed to their shares.
The DLF issue had a price band of Rs500-550; it was eventually priced at Rs525. An executive at a foreign brokerage who did not wish to be identified said the share wouldn’t rise much on listing because retail investors had not oversubscribed their quota of shares.
Geojit Financial Services Ltd, a brokerage, and S. Ramesh, an investment banker at Kotak Investment Banking, a unit of Kotak Mahindra Capital Co., said they expected the issue to list at a 10% premium. “We do not see any selling pressure in the case of DLF and at the same time we do not see Vishal Retail kind of action on the DLF counter on listing day,” added V.K. Sharma of Anagram Securities Ltd.
On Wednesday, shares of Vishal Retail Ltd that had been issued at Rs270, listed at Rs472.50 and closed at Rs753, a premium of 179%.
In the grey market (or unofficial exchange), DLF’s shares are trading at a premium of Rs25-30. The euphoria of the Vishal Retail listing and the events that followed would rub off on DLF and the premium could increase to Rs40, said an Ahmedabad-based broker who did not wish to be identified.
If it lists at a 10% premium, DLF will have a market capitalization of Rs99,000 crore. At Wednesday’s closing price for other shares on BSE, this would make DLF the eighth largest Indian company by market value behind Sensex heavyweights such as Reliance Industries Ltd, Oil and Natural Gas Corp., Bharti Airtel Ltd, NTPC Ltd, Infosys Technologies Ltd, Tata Consultancy Services Ltd and Reliance Communication Ltd.
The BSE index committee that reviews the constitution of the Sensex will discuss whether DLF should be included in the index at its next meeting, said a person close to the development who did not wish to be identified. The review committee consists of fund managers from large mutual funds, financial journalists, other market participants and officers of the exchange.
BSE’s website lists the terms for inclusion of a scrip in the Sensex including a listing history of three months. However, exceptions can be made if the market capitalization of a newly listed company ranks among the top 10 in the BSE universe.
“We (the committee) have not discussed the inclusion of the DLF scrip in Sensex. Apart from the three-month listing history, there are other norms including 100% trade frequency during the three-month period and, more importantly, the weightage of sector on the exchange,” said U.R. Bhat, managing director ofDalton Capital Advisors, and a member of the index committee.
The free-float (the volume of shares of the companies available for trading) market capitalization of the Sensex stood close to Rs9.45 trillion at the end of Wednesday. The expected free-float market capitalization of DLF after listing is above Rs11,500 crore.
Going by this value, the DLF scrip will enjoy weightage of 1.2% in the benchmark index. This is higher than the weightage of Sensex constituents such as Cipla Ltd, ACC Ltd, Reliance Energy Ltd, Ranbaxy Laboratories Ltd, Maruti Udyog Ltd, Dr Reddy’s Laboratories Ltd and Hero Honda Ltd.
Dr Reddy’s and Hero Honda scrips are at the bottom end of the list in terms of free-float market capitalization and DLF could replace one of these two stocks, according to analysts who did not wish to be identified.
On Wednesday, DLF Ltd announced that associate company DLF Assets Pvt. Ltd (DAPL) had received $200 million in funding from a Lehman Brothers fund.
Earlier, DE Shaw had invested $400 million in DAPL, which will bid to buy assets (developed properties) of DLF Ltd that the company wishes to sell. DAPL has already acquired some properties of DLF Ltd as disclosed by the company during its share sale.
(Sunil Raghu in Ahmedabad contributed to this story.)