DLF gets ready to float IPP, third-biggest fundraising in Indian real estate space

DLF Ltd, the country’s largest realtor by market capitalisation, has set the ball rolling to float its institutional placement programme (IPP) which would help the firm raise fresh cash besides allowing it to meet minimum public holding norms. It has offered 81 million fresh shares in an offer which is limited to institutional shareholders.

The price of the share sale has not been frozen yet but at the current market price the firm could raise around Rs 1,940 crore ($358 million). This would be the biggest IPP issue in India and the third-biggest fund raising exercise ever in the real estate space in the country.

The previous two big ticket funding too happened in DLF. The firm had raised over Rs 9,000 crore (over $2 billion then) six years ago as IPO. It soon followed it up with $600 million funding from Lehman Brothers and DE Shaw for DLF Assets. These two funding transactions were executed close to the peak of the stock market boom.

Although there were a few more large funding transactions in dollar terms, given the depreciation of the Indian currency this would be by far the third-largest such fund raising in the real estate sector ever.

As many as eight merchant banks have been roped in as book running lead managers. These include JP Morgan, Deutsche Bank, Bank of America Merrill Lynch, Standard Chartered, CLSA, HSBC, Kotak Mahindra and UBS. India Infoline is the co-book running lead manager to the large issue.

VCCircle had first reported on April 5 that DLF hired JP Morgan, Deutsche Bank, Bank of America Merrill Lynch and Standard Chartered as the investment bankers for the share sale programme.

The move is in line with SEBI’s guidelines stipulating 25 per cent minimum public shareholding for a listed company. The promoters held 78.58 per cent stake in the firm as of March 31, 2013. The IPP will dilute their holding to 75 per cent to meet the listing norms.

DLF intends to use the money mainly for the repayment of borrowings, general corporate purposes, working capital requirements and capital expenditure.

The company had net debt of Rs 21,433 crore as of December 31, 2012, and has been selling non-core assets to raise cash to retire some of the debt on its books.

DLF’s shares closed at Rs 239.35 a share, up 2.81 per cent, on the Bombay Stock Exchange on Tuesday.

The company had come with its IPO at an issue price of Rs 525 a share and has seen the prices tank, like most other real estate firms, over the past few years.

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