DLF IPO: Should we or should not?

Yes, DLF outdoor campaigns have wrapped all the metro’s major crossings. The advertorials and mentions in all the media notwithstanding, people are still a bit skeptical about the issue.

The rumor that floats around about the biggies like Unitech and DLF is, even before in the board room the management committees zero in on a project, investors from all the quarters and all the sizes (mainly from Northern part of India) start chasing them with pot full of money.

Over the last few months, Indian real estate sector has undergone a sea change. Appreciating rupee, the central bank’s (i.e; the Reserve Bank of India) measuring up of the sector with strictest of guidelines broadly to check the unrealistic boom is taking its toll supremely on a market which mostly ran on speculation and rosy prediction from vested interest group which includes a certain section of the mainstream media.

No wonder, in the recent past the investors have had a love-hate relationship with the sector. Remember, before DLF some other big realtors have not yielded the anticipated success with their IPO offers (including those who listed on London’s Alternative Investment Market (AIM) and have been trading at a discount of 8-20%. News here)

DLF, earlier also (if I remember right in last August) wanted to issue its IPO but could not do so, firstly, because it could not resolve the issue with its minority shareholders and secondly, the regulatory body, Securities and Exchange Board of India (Sebi) raised question about its ridiculous disparity in the valuation of it’s land bank plus the quality of its disclosures.

Some also feel that the IPO is over valued. Let’s take a look at who is saying what,

Brokerage house Edelweiss

We arrive at an NAV (net asset value) of Rs 512-517 per share. The IPO at the price band of Rs 500-550 is at two to minus six per cent discount to its NAV.


Brokerage house Enam

At the upper band of Rs 550 the stock trades at a significant premium to our base case valuation of Rs 404. We believe the stock is overvalued and initiate coverage with Sector Underperformer rating and a price target of Rs 404.

Angel Broking said

On the basis of the prevailing property prices in the cities where DLF has its projects and also considering that DLF would realistically be able to develop all this property we have arrived at a net asset value of Rs 475/480 on the lower and upper end of the price band.