ET reported yesterday that DLF has acquired prime land in West Delhi from DCM Shriram Consolidated Limited (DSCL) and the Lohia group for Rs. 1675 crores, in what is said to be the biggest land deal in India beating Unitech’s aquisition of 300 acres of land in Noida for Rs. 1582 crores. This is the first major land deal that DLF has made after its IPO. The land includes the Swatantra Bharat Mills and DCM Silk Mills property.
The DLF listing date is July 05 2007. DLF will list on both the NSE and the BSE. DLF will also be traded in the futures and options segment on listing. DLF is likely to list at a premium to its FPO issue price because of the institutional interest involved in the IPO and also because of the current secondary market conditions which seem encouraging. Further most retail investors will not be able to sell at listing because most of them have opted for part payment option and will end up having non tradable partly paid shares. This will decrease the selling pressure on listing.
Some of the big names such as SBI, LIC, Dubai investor group, DE Shaw, Aberdeen, Blackstone, HSBC etc have subscribed heavily to the DLF IPO. SBI and LIC have put in bids for 500 crores each in the DLF IPO. The institutional investor category in the DLF IPO has done extremely well and has been oversubscribed by over 5 times. However the retail investor category remained undersubscribed. Kotak made an announcement that the DLF IPO is a huge issue and hence one cannot expect retail to be oversubscribed heavily. However the Reliance Petroleum IPO which was of similar size got heavily oversubscribed even in the retail investor category. This shows that if the valuation and pricing of an IPO is reasonable, the retail investor will apply no matter what the issue size is.
The subscription for the much hyped mega DLF IPO has ended. DLF IPO has performed decently but below market expectations. DLF IPO has been subscribed by 3.47 times (oversubscribed 2.47 times). Retail category has been subscribed by 0.975 times (undersubscribed by 0.025 times). Hence retail investors in the DLF IPO will receive full allotment. Investors who used the part payment option to apply in the DLF IPO might face a problem. These investors will be alloted partly paid shares of DLF on the allotment date. Investors won’t be able to sell the partly paid shares on the listing date. After getting allotment, they will have to pay the remaining money and then convert the partly paid shares to fully paid shares. This process might take more than 1 week considering the size of the DLF IPO. Considering the fact that the time between knowing the allotment status and listing date of an IPO is very small, these investors would not be able to sell the DLF shares that they have been alloted on the listing day of DLF. If DLF share prices tank after listing then losses might be huge since full allotment will be made and investors won’t be able to limit losses by booking losses on the listing date. So, it might be a double whammy for small investors who used the part payment option. Institutional investor category in the DLF IPO has been subscribed by 5.13 times (oversubscribed 4.13 times) and the High Networth Individual category has been subscribed by 1.14 times (oversubscription ratio : 0.14 times). High Networth Individuals might get close to full allotment since the unsubscribed portion in the retail and employee categories will be added to HNI category.
I feel DLF Universal Limited will have a decent listing and might provide investors with some listing gains if the IPO issue price is fixed at the lower price band of Rs 500. I recommend selling on listing since peer group companies especially Unitech is available at a much lower valuation. The listing date of DLF is likely to be somewhere in the second week of July. DLF will list both on the NSE and the BSE and will be admitted into futures and options trading on listing. Investors who have invested in the DLF IPO can expect to receive the IPO refund in the first week of July through ECS. Allotment is likely to be made a few days before the listing date. The allotment status of DLF IPO and the details for checking the allotment status online will be posted here as soon as they are available.
DLF IPO Price : DLF has fixed the issue price for the IPO. The DLF IPO Issue price is Rs. 525. DLF seems to have chosen to play it safe by fixing the IPO issue price exactly in between the higher end and lower end of its IPO price band. This means investors might get some listing gains since Institutional investors were willing to buy at the higher price band. The institutional investor category has been subscribed by over 4 times at the higher end of the price band and by over 5 times at the lower end of the price band.
Looks like the retail category in the DLF IPO has been oversubscribed. Due to the large number of applications coming in for the DLF IPO in the last few hours of the IPO being open for subscription, the data is still being updated by the Lead managers for the IPO. As of 8 o clock, the DLF IPO has been subscribed by 3.47 times (oversubscribed by 2.47 times). Retail category is expected to be subscribed between 0.95 times and 1.25 times. Once the final category wise subscription figures are available we will have more clarity. Those who applied for the DLF IPO under the retail investor category might get full subscription. Hence its a case of high risk high reward scenario wherein if DLF lists at a premium the profits will be huge and if DLF lists at a discount then the losses would be equally huge. I feel DLF will not fix the IPO issue price at the higher band at Rs. 550. Lets wait till the investment bankers fix the issue price. DLF IPO is trading in the grey market at a premium of around Rs. 100. The grey market premium might fall tomorrow if the final subscription figures turn out to be disappointing.
DLF IPO has received subdued interest from the retail investor community. As of 2 PM today (closing date), the DLF IPO is undersubscribed in the retail category. However, overall the DLF IPO is oversubscribed. The DLF IPO has been subscribed by about 3 times its IPO issue size (oversubscribed 2 times). Retail Investors are adviced not to use the part payment option. If part payment option is used investors would get partly paid up shares and won’t be able to sell the alloted shares on the listing date. Part payment option can be safely used if the retail category is subscribed by atleast 3.5 to 4 times. At the moment DLF IPO is undersubscribed and I doubt if it will be oversubscribed by more than 3 times by end of day today.
4 PM Update : As of 4 PM DLF IPO has been subscribed by 3.12 times (oversubscribed 2.12 times). Retail Category still seems to be undersubscribed. Retail subscription is approximately 0.80% as of now which means it is undersubscribed by 0.20%
6 PM Update : As of 6 PM DLF IPO has been subscribed by 3.45 times (oversubscribed 2.45 times). Retail Category seems to be fully subscribed. Retail investors are likely to get full allotment. Hence profits or losses will both be huge depending on the DLF listing price.
Inorder to aggressively push the DLF IPO to retail investors, brokerages and agents are pushing the IPO by using illegal methods like providing cash incentives to investors. A leading Indian daily reported that Kotak securities is offering very high commissions to brokerages on a per application basis. This money is not paid from K.P. Singh’s pockets. It would be charged as issue expenses and will be paid using the shareholders money raised through the IPO. At the end of the day the investment banks and lead managers make money and so do the brokerage firms and sub brokers, all at the cost of the poor retail investor. There is another type of incentive which is being offered where agents are paying investors upto Rs. 2500 for applying in the DLF IPO for DLF shares worth Rs. 99,000. On allotment, the DLF shares will be transferred to the agent who will pay the investor Rs. 2500. The agent will then pool all the shares and sell the shares in the secondary market and will make money if DLF does list at a huge premium to the issue price. Now, how different is this from the IPO scam involving Yes Bank and IDFC which rocked the markets about a year earlier? Is Mr. Damodaran and his team listening?
P.S. This scheme though illegal seems to provide good returns for investors with no risk (default risk does exist). The ROI offered is over 2.5% which translates to over 30% on an annualised basis. I wonder how the agents are so confident that DLF will offer higher returns on listing.
As of 12 noon today, the DLF IPO has been oversubscribed. The DLF IPO has received a subscription of 1.10 times the IPO issue size which means the DLF IPO has been oversubscribed by .10 times. I never expected the DLF IPO to get oversubscribed so soon. But as mentioned earlier this may be a ploy by investment bankers managing the DLF IPO. Most of the bids (almost all of them) for the DLF IPO have come in from institutional investors. Institutional investors have the option of withdrawing their bids. Further institutional investors need to pay only 10% margin money on application. I suspect institutional investors are playing games by putting in fake bids and creating hype. These bids can be withdrawn at a later date. It doesn’t make sense to me why institutional investors are rushing in on the first and second day of the IPO. Bids usually come in on the last 2 days of the IPO. Applying on the first day in no way increases the chances of allotment. Hence this raises a doubt in my mind. I prefer to wait till this evening to take a call on whether to apply in the DLF IPO or not. For more information on the DLF IPO make sure you read the previous articles on DLF IPO News and DLF IPO Details
The DLF IPO has almost been subscribed by 50% its issue size in the first 1 hour itself. DLF IPO has received heavy subscription by institutional investors. To put things into perspective, 50% subscription in the DLF IPO means that the DLF IPO has received bids worth Rs. 4500 crores. This means a 100 crore IPO, would have been oversubscribed by 40 times. Hope this puts things into perspective. However, since lot of big name investment banks are involved, there is a possibility that these investment banks put up fake bids for the DLF IPO in order to generate hype and later withdraw these bids. This tactic has been used in the past and there are no measures placed to prevent it from being used in future. For more information on the DLF IPO make sure you read the previous articles on DLF IPO News and DLF IPO Details
Indian Real estate giant, DLF Universal’s IPO hit the markets on June 11 2007 and will close for subscription on June 14 2007. The DLF IPO issue, initially scheduled for June 2006 faced a lot of hiccups. Minority investors alleged that the company cheated them. DLF managed to settle this issue and then filed a new prospectus with SEBI. SEBI’s approval for the same was received earlier this month. With rising interest rates, the construction and real estate sectors, which are both highly capital intensive and have a high debt equity ratio, have clearly been affected. However, Investment banking sources close to the DLF IPO issue say that the DLF issue is expected to be priced between Rs. 550 and Rs. 600 a share. The face value of DLF universal’s shares is Rs.2 and as per SEBI guidelines the IPO issue cannot be priced less than Rs. 500 per share. After the IPO, DLF Universal’s promoter KP Singh’s 87.5% stake in DLF Universal, will put him high up among the list of richest Indians. Will it make those who invest in the DLF IPO also rich? That’s exactly what millions of Indian investors are hoping. History stands testimony to the fact that mega IPO issues are usually less risky and reward investors with decent listing gains on the day of listing. Lets wait and watch the performance of India’s biggest/largest IPO. When DLF UNIVERSAL lists on the stock exchanges in the first week of July (probable listing date) it would cause a change in the SENSEX and NIFTY compositions and will make it to the Index heavyweights list. DLF will list both on the NSE and the BSE and will be eligible for trading in the Futures and Options segment. For the DLF IPO allotment status, listing date, subscription details, IPO refund date and all updates relating to DLF IPO issue, do check this space regularly.
DLF IPO LOT SIZE
DLF Universal has fixed the lot size for the IPO. The DLF IPO lot size is 10 shares. Retail Investors applying in the DLF IPO can apply for a minimum of 10 shares or a maximum of 180 shares.
DLF IPO opens for Subscription on June 11, 2007 and closes for Subscription on June 14, 2007
DLF IPO Price Band has been fixed between Rs. 500 (floor Price) and Rs. 550 (Cap Price)
DLF IPO Payment Option for Retail Investors
Retail investors [those investing in the stock market (primary market) for less than Rs. 1 lakh] can bid on the DLF IPO on payment of Rs 150 per share of which Re 1 will be credited to face value of DLF shares and Rs 149 towards premium on application. The balance amount will be payable on due date. QIB investors will have to pay 10 per cent of the bid amount and the balance before allotment.
This means if you apply for less than Rs 1 lakh in the DLF IPO, then you need to pay only Rs. 150 per share and not Rs. 550 per share. The balance amount needs to be paid after you get the DLF shares alloted. Its likely that you won’t have to pay the balance amount since the DLF IPO issue is likely to be oversubscribed by atleast 4 times. The balance amount will be adjusted against the refund amount.
Lets take a hypothetical situation
Lets assume you apply for 150 shares in the DLF IPO at cut off
In normal circumstances you would have to pay Rs. 82,500 (150 * 550), but now you will have to pay only Rs. 22,500 (150 * 150). Now if the issue gets oversubscribed by 4 times, you will get an allotment of 37 DLF shares for which you will have to pay (37*550) = Rs. 20,350. This will be adjusted against the Rs. 22,500 you paid while applying for the DLF IPO and you will get a refund of Rs. 2,150.
For more details on the DLF IPO also read DLF IPO NEWS