Tuesday, July 17, 2007

How to deal with competitors, analysts, advisors, minority shareholders, customers and win the stockmarket

The untold story...(?!)

DLF issue went through. But like the rival had sworn, not in the form it was originally planned in.

Though company sources would never confirm, DLF had plans to issue shares in the region of Rs 900-1,100, when it first filed DRHP. It eventually issued stock at Rs 525 and reduced the shares on offer.

People who followed the issue carefully know it was one of the most tumultuous IPOs in recent times. Right from the time the issue was conceived in Q1 of 2006, it was plagued by controversy.:T Surendar & Partha Sinha,TNN
DLF public offer: Most tumultuous in recent times-India Business-Business-The Times of India

Did Enam pull a fast one on realty major?

Did Enam’s absence from DLF IPO, the largest in Indian history, lead to the lackluster performance of the offering? The market believes so.

And there’s more. Enam’s stoic silence in the DLF IPO coinciding with an IPO of one of its own companies was almost a ‘Do-Not-Subscribe’ sign for a large number of stags in the domestic market with whom Enam shares an excellent relationship. :Partha Sinha,TNN

DLF's real estate story

Four years after delisting its shares from the Delhi Stock Exchange, real estate behemoth DLF is knocking at the capital market again selling shares at - hold your breath - 837 times the valuation at (The full version of this story is available to Premium Service subscribers of "Business Standard" only. Worth subscribing.) :N Mahalakshmi

DLF IPO:From a foreign investors' view-point:Dipan Mehta, Member of BSE & NSE

"Basically if you look from a foreign investors' view-point, they want to get into industries which are India-centric; therefore, with the kind of appetite seen in retail, telecom or for that matter infrastructure and real estate, is no different, because if you buy into real estate stocks, or real estate in India, you are basically betting or getting an exposure to the economic growth rates in India. So if you have a good quality and a good proposal and if a good value proposition as DLF is at present, then there will be very good appetite from overseas investors."

"Also, if you notice the kind of private placements in the form of maybe listing in overseas market, or FCCB issues, or the QIP ones, which some of the other real estate companies have done in the recent past, all these issues have got very good response and there is no reason why DLF too should not get a good response, considering that the quality factors in DLF are certainly the highest."

IPO rush

The success of the DLF IPO, which was oversubscribed nearly 3.5 times, should give confidence to merchant bankers and companies that want to raise money in the capital market. DLF has raised Rs 9,000 crore, despite the fact that the issue was considered expensive even optimistic analysts had recommended subscribing at the lower end of the price band.

The story in the much smaller Vishal Retail IPO is even better. With a hot-button business like retail, the issue attracted over-subscription to the extent of 69 times. At the upper end of the price band, the company will collect Rs 129 crore.

Niche Brokerage report on DLF IPO:

Concerns: DLF owns only 0.5% of the land reserves

Though DLF and its subsidiaries own 1,160 acres, or 11.3%, of the 10,255 acres that comprise the land reserves as of April 30, 2007, DLF directly owns only 0.5% of these land reserves. The balance 10.8% is held by the subsidiaries of DLF. Of the 1,160 acres that DLF own, 38 acres have been leased to DLF by governmental authorities on a long-term basis and DLF has freehold title to the balance.

The remaining land reserves are subject to agreements to purchase, development rights agreements or memoranda of understanding for acquisition.

National Consumer Dispute Redressal Commission: greycoconut on YouTub

The Indian Investor's Blog:Deepak Shenoy

Second, the real estate market, as we know, is largely "black" - at least in Delhi where DLF is king. Now this "black" money routinely flows out of India through the hawala route, and comes back through FIIs as "participatory notes" - something SEBI and the finance ministry know but cannot curb without allowing a huge crash to happen. The black money of Indian bigwigs has perhaps flowed back into the DLF issue, and some of it could even be the black money in the real estate market.

Why am I not interested in this(DLF) share?

Their "other income" is 1400 cr. which is about 70% of their net profit (1941 cr). I don't like that. Turns out it has come from "disposal of fixed assets and long term investments" - this is a one time thing.

If you remove the one-time other income, the earnings are about 500 cr. which means the company is getting a P/E of 190. I'm not happy to pay such ridiculous valuations in the age of high interest rates, low borrowing capabilities and oversupply.

Land valuations are something I do not understand. How they can value land they do not own is beyond me.

SEBI says can probe complaints against DLF : Indian IPO Updates

April 04,2007: Doing a U-turn on the DLF IPO case, market regulator SEBI has submitted before the Delhi High Court that it can probe complaints against companies that intend to get listed.

"There is no direct bar (on investigation) in the case of non-listed companies," the SEBI counsel informed the bench headed by Justice Tirath Singh Thakur in response to a query whether there was any direct bar against such probe in the SEBI Act.

Securities and Exchange Board of India, earlier in its affidavit, had said that it cannot investigate complaints made against the real estate major as it was an unlisted company.

It had then said that the Ministry of Company Affairs was the right authority to deal with grievances in case of non- listed companies.

SEBI's U-turn came yesterday during hearing on a PIL by Society for Consumers' Investors and Protection (SCIP), which had sought a probe into DLF's conversion of debentures into equity shares.

The counsel for petitioner B R Schadeva cited the provisions under SEBI Act and Companies Act, which said that SEBI can investigate complaints against those companies which intend to get listed. In this case, DLF had filed red herring prospectus with SEBI, which clearly showed that the company wanted to get listed on the exchange.

DLF IPO likely to hit market in February: Economic Times

December 5,2006: The DLF group’s much-touted IPO will finally see the light of day. The group, which has already resolved the issue with its minority shareholders, is now in the process of filing the draft red herring prospectus (DRHP) with Sebi. Sources in the company told ET, “The DRHP will be filed by December 15 and the issue should hit the market in February.”

The company recently resolved the issue with the shareholders and in it’s extra-ordinary general meeting, the board approved the revival and issue of 81,983 shares, 2% unsecured redeemable debentures of Rs 100 each, which are optionally, fully or partly convertible at par or at premium to the shareholders in accordance with their entitlement.

DLF Minority Shareholders Hit Pay Dirt With The Settlement; IPO On Track: VC Circle

November 15,2006: DLF Universal, the Delhi-based real estate giant, has resolved the conflict with its minority shareholders, and is now gearing up for its mega IPO. Each minority shareholder will get 440 shares for every single share held. This means minority shareholders have hit pay dirt with the deal. There are many who have become multi-millionaires overnight with this deal.
Accoding to a settlement reached at an Extraordinary General Body Meeting on Tuesday, the minority shareholders will be issued 81,983 shares or 2 per cent of unsecured redeemable debentures of Rs 100 each. This would be converted into equity shares in the ratio of 10 equity shares of Rs 10 each.

It would be further split into 5 shares of Rs 2 each. The shareholders also approved a bonus share issue of seven equity shares of Rs 2 each for every share of Rs 2 held after the conversion of the debentures into equity shares and subsequent splitting of shares.

Ultimately, each minority shareholder will now get 440 shares for every single share held. As the terms and conditions remain the same as the previous debenture issue, the minority shareholders will not lose out on the IPO gains.

DLF IPO was derailed as minority shareholders approached the Company Law Board and SEBI alleging that the DLF management took them for a ride when the company held a rights issue in September 2005. Some of the investors were denied participation in the Rs 35 crore rights issue which increased promoters' stake to 99.5 per cent.

With the settlement, DLF IPO is expected anytime soon. The company will first refile its Draft Red Herring Prospectus with SEBI.

This is a lesson for companies who don't value interests of minority shareholders

DLF Patches Up With Minority Shareholders: VC Circle

October 20,2006: Real estate giant DLF Universal has finally settled the issue with its minority investors, a dispute which derailed its much-hyped IPO plans. DLF has convened an extraordinary general meeting on November 14 to approve allotment of the unsubscribed portion of its last year’s rights-cum-debenture issue to minority shareholders. This will make 950-odd minority shareholders millionaires overnight (not that they aren't already).

DLF’s IPO will now sail through without hindrances. It was delayed after minority shareholders complained to the Securities and Exchange Board of India (Sebi), the ministry of company affairs and the Delhi High Court, that DLF management sidestepped them when a rights issue was completed last year.

Now the deal is that a common shareholder with 50 DLF shares will get 20,000 shares of Rs 2 each. Going by the proposed IPO price of a minimum of Rs 600 a share, the shares’ value will be Rs 1.20 crore.

DLF is expected to file a new prospectus with SEBI soon.

DLF apologizes to minority investors: Indian Express

September 30,2006: In a major step down from its stated position, India's largest real estate company, DLF Universal, has apologised to its minority shareholders and assured them that steps would be taken to settle the dispute over the rights debentures issue within one month.

In a meeting with minority shareholders today, vice chairman of DLF, Rajiv Singh apologised for not redressing the grievances of minority shareholders earlier and assured them that an advisory committee would be set up to look into the modalities of how the issue could be resolved. Singh reportedly said that the company would ensure that the settlement is in favour of shareholders.

"The company has admitted that it made a mistake and has assured us that our rights would be taken care of. It also said that Sebi and Ministry of Company Affairs (MCA) had enquired about the issue and DLF wants to settle it before venturing into the capital market again," said MS Tanwar who is a minority shareholder with the company.

The company on its part has said that "it will settle a few issues" and then come up with a statement in the next couple of days. It is learnt that today's meeting lasted for less than an hour and was attended by 35-40 minority shareholders.

The meeting was the first overture from the company addressing the claims of its minority shareholders after its IPO was called off last month. While the promoters of the company own 99.5 per cent stake in the entity, there are 1,308 minority share holders who have the residual stake. The controversy had erupted when the company had made a rights issue of partially converted debentures in a 1:1 ratio in December last year. Almost 90 per cent of minority shareholders had cried foul alleging that no intimation about the issue was made to them. The shareholders had written to Sebi alleging breach of trust and the matter is pending before MCA.

However, despite Singh's apology and promises, small shareholders are still suspicious of the company’s motives. "The company did not come with any concrete plan as to how it plans to settle the debenture issue. Instead they made a lot of promises and it all seems to be delaying tactics," said Kamal Bhatia, a shareholder in the company.

When contacted, the company spokesperson confirmed the meeting and said that a statement to the effect will be made during the next two days. The resolution of this issue is important for the company, if it is to revive its IPO.

DLF IPO Put Off Again; To Resubmit Draft Prospectus With SEBI: VC Circle

August 31,2006: DLF gROUP has postponed its much-awaited IPO again. This time the Delhi real estate giant has even withdrawn the draft prospectus from the regulator SEBI. It will resubmit the document again in another month and half. This means DLF is in real soup and the IPO managers or company management did not foresee the shareholder revolt.

"The withdrawal is just for the revision of DHRP. It will be updated with the latest information and an audited report. It is very important to put up the latest information in the interest of the investors," said Saurabh Chawla, Director Finance, DLF.

Market analsyst expect "a 25-30 per cent downward revision in valuation".

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