New Delhi: DLF Ltd, which is set to raise as much as Rs9,650 crore in what will be India’s single-largest initial public offering, said it plans to sharply curb expenditure on land acquisition, down 54% to Rs3,000 crore from a previously proposed Rs6,500 crore.
In a share-sale document posted on the website of DSP Merrill Lynch Ltd, one of the managers of the IPO, the developer said it owns or holds development rights for 10,255 acres, unchanged from January. Profit in the year ended 31 March rose tenfold, the company said.
DLF’s profit in the year ended 31 March increased to Rs1,940 crore from Rs192 crore, the company said. Sales reached Rs4,034 crore from Rs1,242 crore. The share sale would give DLF a market value of as much as $24 billion (Rs98,400 crore), more than double that of Unitech Ltd, India’s biggest listed property developer.
Net asset values will provide a key valuation benchmark because developers have acquired land over a few years and prices have appreciated in the period, Citigroup Inc. analysts, Ashish Jagnani and Aditya Narain, wrote on 4 May.
“Our current land reserves are sufficient for our planned developments over the next 10 years and provide us with a major competitive advantage as well as protection against land price inflation,” DLF said.
High stakes: The share sale will give DLF a market value of as much as Rs98,400 crore, more than double that of Unitech Ltd, currently India’s biggest listed property developer.
“The size of our land reserves also allows us to respond more effectively to changes in market conditions and demand,” the company said in its filing. DLF had 10,255 acres of land in 26 cities in January. The developer plans to sell 175 million new shares at Rs500-550 apiece between 11 and 14 June.
While DLF and its subsidiaries own 11.3% of the land reserves, they have sole development rights for 44.6% of the total. They have agreements to purchase or letters of acceptance for 35.9% of the land while the rest are joint developments with partners, the company said.
About 60% of the reserves is land “for which we have not yet obtained a certificate for change of land use”, DLF said.
DLF is controlled by billionaire Kushal Pal Singh, whose wealth doubled last year to $10 billion, according to Forbes magazine and who is set to become India’s richest person following the IPO.
Singh, 75, a former Indian Army officer, bought land in Gurgaon, 27km south of the capital, in the early 1980s. Singh developed Gurgaon, carving out residential plots and condominiums and commercial buildings that house offices and retail outlets.
Unitech reported on 28 May that its net income rose to Rs1,300 crore last fiscal year, compared with Rs955 crore a year earlier. The developer, whose shares soared almost 30-fold last year, will also give investors one free share for each stock held.
Prices and rentals of real estate in big cities have been rising as demand outstrips supply. Rental values for office space in Connaught Place, the centre of the Capital, have almost tripled in the past two years, according to Bloomberg data. The location is the seventh most expensive in the world, according to Los Angeles-based property consultant CB Richard Ellis Inc.’s survey released this month.
DLF owns 3.5 million sq. ft of space in completed buildings in New Delhi and its suburbs, including Gurgaon and Noida. It also holds plots of about 7.2 million sq.ft that do not form part of its land reserves, DLF said.
The National Capital Region, which comprises New Delhi and adjoining areas, accounts for 51% of DLF’s land reserves.
DLF had to scrap plans in August for a public offering of as many as 219 million new and existing shares because of shareholder disputes and valuation concerns.
In revised documents submitted in January, the Singh family didn’t offer to sell any stock and the company reduced the number of new shares.
The new shares on offer will constitute 10.27% of the post-sale capital of DLF, the company said.