Chennai: The draft red herring prospectus of DLF Ltd, India’s largest property developer, has not been cleared by the stock market regulator 42 days after it was filed on 2 January, overshooting a preliminary deadline for clearing new issues. This is DLF’s second attempt to tap the equity market to raise funds.
Refusing to comment on company-specific issues, Usha Naraynan, executive director of the Securities and Exchange Board of India (Sebi), said, “Normally, the issues are cleared in 21 days upon receipt of full information. A lot of correspondence takes place between Sebi and merchant bankers or the company, if we don’t have full information. These are not for public consumption.”
Merchant-banking sources involved with the DLF issue said that Sebi has been seeking some clarifications from them, but no specific issue has been flagged. The issues raised by Sebi so far were related to making more disclosures in the draft prospectus. While Sebi should be clearing the IPO (initial public offer) in 21 days, most issues take 40-45 days for clearance after the regulator has received answers to its queries. Typically, in any large stock offering, Sebi comes up with four-five queries that could be related to investor complaints, or making more disclosures in the draft prospectus, sources said. They expect the issue to be out in March.
Six months ago, the first attempt by DLF to raise money from the equity market was called off after a dispute with minority shareholders.
DLF was a listed company until 2002-03, when its promoters increased their stake to 90% in violation of stock-market regulations. While the company paid a fine for that and offered to pay the minority shareholders Rs320 a share to buy their holdings, some declined the offer.
The minority shareholders had alleged that most of them were left out of a rights offer made by the company in 2005, a subsequent bonus issue and stock split, amounting to about 400 shares each. DLF’s failure to settle with these shareholders then, which the company has now done, caused the offer to be pulled out.
According to NDTV Profit, a business news channel, DLF’s second IPO attempt is likely to get further delayed as the market regulator has reportedly raised a query regarding the ownership of a certain piece of land held by the company. It did not disclose the source.
DLF Group executive director Rajeev Talwar said there is no delay and called the NDTV Profit story “speculative”. He said he wasn’t certain whether or not Sebi has sent DLF any queries regarding the revised IPO.
“If they have queries, they will be answered,” Talwar said. “Where is the question of a delay? The delay was last year when it was withdrawn.”
As per the current draft prospectus, DLF has land reserves of 10,255acres and it owes about Rs5,537 crore towards acquisition of these lands or sole development rights. The company estimated that 574 million sq. ft developable area can be built on these land reserves.
DLF had stated that it proposes to use Rs6,500 crore out of the IPO proceeds to acquire land and development rights.
Term loans and working-capital loans in the eight-month period ended November 2006 has almost doubled to Rs6,003 crore from Rs3,008.5 crore as on March 2006.
Rachna Monga and Prashant Gopal contributed to this story