New Delhi: DLF Ltd, which will be India’s largest listed real estate developer when it opens for trading on the Bombay Stock Exchange, priced its shares at Rs525, the mid range of its original price band, giving it about Rs9,187 crore from a sale of 175 million shares. The stock is expected to list in about two weeks.
DLF’s share offer was subscribed 3.47 times with individual retail investors taking up 97% of the 52 million shares set aside for them and its employees offering to buy only about 79% of the one million shares allocated to them.
The mid pricing is “to build confidence in the retail investors, so they don’t sell the shares on the first day of listing,” said Suruchi Kapoor, an analyst with SAL Securities Pvt. Ltd in Mumbai. “It was the institutional investors who oversubscribed and the IPO did not match expectations.”
Institutions did seek to buy more than five times the 104 million shares on offer to them. DLF said that nearly 90% of institutional demand came from foreign institutional investors, especially from funds looking for long-term investments.
“There may not be listing gains because there is also a high level of risk attached,” says Shailesh Kanani, real etsate analyst at Angel Broking. “Over the longer term, valuations may be better.”
Some analysts say confusion over the company’s land bank may have set the tone for the offer. DLF says it has 10,255 acres of land reserves, but owns only 11.3 % of this directly and through units. It has rights to develop or buy the rest of the land, through a series of agreements.
“Given the concerns about DLF’s valuation, I don’t think they could have priced it too aggressively,” said Rahul Rege, head of institutional equities, BRICS Securities.
“Few large IPOs list below their announced price. Initially, there will be institutional interest,” predicts Harendra Kumar, head of research at ICICI Direct.