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Wednesday, June 21, 2006

Sebi to be cautious in clearing DLF IPO

Capital market regulator Securities and Exchange Board of India, Sebi, wants to be fully satisfied with DLFs claims in the draft red herring prospectus, DRHP, before clearing its issue, highly-placed sources in Sebi said, reports The Financial Express.

The Sebi reaction came in the wake of some investor associations claiming that crucial disclosures like EPS and net profit in DLFs draft prospectus were misleading.

A top Sebi source confirmed that it has received queries from many investors regarding the issue. He further added, we want to be fully satisfied with every minor thing in the DLF issue. As a regulator, our responsibility becomes all the more greater in clearing such issues.

Meanwhile at a press conference, an association of about 200 investors (Midas Touch Investors) claimed that DLFs EPS, earnings per share, amounts to Rs 1.32 against Rs 12.84 given in the real estate major's DRHP for the mega issue. The figure (Rs 1.32) was calculated by dividing DLF's net profit of Rs 199.4 crore (Rs 1.99 billion) by 151.2 crore shares, as given in the DRHP.

Against an EPS of Rs 1.32, DLFs endeavour is to price the IPO at Rs 600. This would be a PE ratio of 454.5, whereas the current PE ratios of the top 30 firms range between 6.7-31.5. On a P/E ratio of 20, which is above average, the DLF share would be around Rs 26, investors claimed.

Reacting to investors allegations, a DLF spokesperson said, This is a campaign to malign DLF's IPO prospects. Sebi will take a call on it. The association stated from the DRHP that the profit of subsidiaries (Rs 236.5 crore (Rs 2.36 billion)) is more than the profit of the group (Rs 199.4 crore).

Restated profit of DLF (Rs 103.9 crore (Rs 1.03 billion)), along with subsidiaries' profit (Rs 236.5 crore), is more than DLFs consolidated net profit, and the discrepancy is not explained in the DRHP, they said.

The investors have written to Sebi and finance ministry to direct DLF to withdraw its offer document and file it again after compliance with DIP, disclosure and investor protection, guidelines. The investors also asked the market watchdog for duration of 21 days after re-filing to let them make an informed investment decision.


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