BackDLF shares plunge 30% to record low after Sebi market ban
The stock touched an all-time low of Rs102.70 in intra-day trade; market capitalization erodes by `7,376.33 crore to `18,888.43 crore
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Mumbai: Shares of DLF Ltd plunged 30% to a record low on Tuesday, a day after the Securities and Exchange Board of India (Sebi) banned the real estate developer and its chairman K.P. Singh from accessing the capital markets for three years on finding them guilty of engaging in fraud and unfair trade practices.
The stock touched an all-time low of ₹ 102.70 in intra-day trade on Tuesday. As of June 2014, the company has a debt of ₹ 19,000 crore.
The shares closed trading 28.46% lower at ₹ 104.95 apiece, while the 30-share S&P BSE Sensex shed 0.13% to 26,349.33 points.
DLF’s market capitalization has eroded by ₹ 7,376.33 crore to ₹ 18,888.43 crore.
Sebi has penalized the entities on account of three key violations: non-disclosure of related-party transactions, non-disclosure of financial details related to subsidiaries, and inadequate disclosure of outstanding litigation.
The issue dates back seven years, when DLF came out with an initial public offering (IPO) in 2007 to raise ₹ 9,187.5 crore.
On Tuesday, the stock was most traded on BSE and NSE, and eroded nearly 82% of its net worth from its listing price of ₹ 582 per share.
“We think that the Sebi order banning DLF from capital market exercises for three years is a big negative development for the company," Macquarie Capital Securities India (Pvt) Ltd said in a note on Monday, adding that it was placing its ‘outperform’ rating and target price on the company under review.
On Tuesday, Deutsche Bank AG cut its target price to ₹ 170 per share from ₹ 190 earlier, while maintaining its ‘hold’ rating on the stock, adding that while it believes the Sebi order will not materially alter the company’s operations, it will push forward any plans for further equity issuance and also postpone value-unlocking in rent-yielding commercial portfolio through Real Estate Investment Trusts, or REITs.
While announcing its March quarter financial results, DLF had said that the company plans to raise around ₹ 3,000-3,500 crore in the current fiscal year against its office properties through REIT.
“Additionally it may change the contours of the capital restructuring arising from imminent maturity of compulsorily convertible preference shares in one of DLF’s subsidiaries," Deutsche Bank analyst Abhishek Saraf said in the note.
“We are not overly worried about the diminished prospects of deleveraging as the company has now reduced leverage to around 0.6x. However, we do believe that a spate of unfavorable judicial/regulatory pronouncements can suppress sentiment," Saraf added.
In other setbacks to the company, on 10 October, PTI reported that the Delhi high court dismissed DLF Home Developers Ltd’s plea questioning whether the Competition Commission of India (CCI) had the jurisdiction to probe allegations of anti-competitive practices against it in respect of its residential projects in Gurgaon.
In August, the Supreme Court had ordered the company to pay a ₹ 630 crore fine imposed on it by the antitrust regulator for unfair business practices. DLF said it would pay the fine, pending a final decision by the apex court on an appeal filed by the realtor against the penalty.
On 28 September, PTI reported that the Directorate General of Central Excise Intelligence (DGCEI) has registered a case against the company for alleged non-payment of service tax over transfer of development rights to other firms.
On 3 September, the Punjab and Haryana high court ordered the cancellation of a 350-acre land allotment in Gurgaon authorized by the Bhupinder Singh Hooda government in 2009.
Some realty stocks with strong balance sheets rose. Shares of Mahindra Lifespace Developers Ltd rose 3.09% to ₹ 535.30.
A few realty stocks closed lower such as Unitech Ltd, which fell 2.43% to ₹ 18.05, Housing Development Infrastructure Ltd which shed 5.11% to ₹ 75.15 and Godrej Properties Ltd which gave up 1.64% to ₹ 236.75.
The S&P BSE Realty index slipped 9.24%, the most since 3 November 2009.
However, DLF has clarified to BSE that “The Order dated 10 October 2014 passed by the Hon’ble whole-time member of Sebi has come to the notice of DLF Ltd only on 13 October 2014. The same is being reviewed by DLF and its legal advisers. DLF and its board wish to reassure its investors and all other stakeholders that it has not acted in contravention of law either during its IPO or otherwise. DLF and its board were guided by and acted on the advise of eminent legal advisers, merchant bankers and audit firms while formulating its offer documents. DLF will defend itself to the fullest extent against any adverse findings and measures contained in the order passed by Sebi. DLF has full faith in the judicial process and is confident of vindication of its stand in the near future."
“The company can technically go and list its real estate investment trust (REIT) in the Singapore market but the biggest question is why would any exchange allow a company to come and list when its own market regulator has debarred them. They can do their commercial mortgage backed securities (CMBS) or non-convertible debenture (NCD) but they cannot list them; it will have to be a private placement," said a banker from a domestic investment bank who had managed one of their qualified institutional placements and who did not want to be named.
Pooja Sarkar contributed to this story.
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