DLF files for Rs 13,600 cr IPO

DLF Universal Ltd, which filed a draft red herring prospectus for itsinitial public offer with the Securities and Exchange Board of India today,aims to raise Rs 13,600 crore by issuing 202 million equity shares, eachhaving a face value of Rs 2. The shares will be offered at a premium to bedecided through a 100 per cent book building process.
 
 This will be the biggest IPO ever in India, comfortably overtaking the TCSfloat of Rs 5,000 crore in August 2004.
 
 The issue, if the green shoe option is exercised, will constitute 12.77 percent of the fully diluted post-issue capital of the company. That willleave about 87 per cent equity under the control of DLF Chairman KP Singhand his son, DLF Vice-Chairman Rajiv Singh.
 
 If the company is able to raise the money from the market, its total valuewill be pegged at Rs 106,499 crore. The notional value of the holding inthe hands of the father and the son will be Rs 92,899 crore, or about $20billion, placing them second in the list of the richest Indians, justbehind Mittal Steel Chairman LN Mittal.
 
 "Notional is a good word. We are looking to create an institution, one thatwill take its rightful place not only in India but internationally," saidRajiv Singh. The company's balance sheet includes Rs 848.9 crore of"goodwill" in 2006, up from Rs 52.2 crore in 2005.
 
 Of the targeted amount, the company intends to spend Rs 6,500 crore on landacquisition, Rs 3,100 crore on development and construction of existingprojects, and Rs 4,000 crore on prepayment of loans.
 
 Of the amount intended for land purchases, Singh said only a "smallportion" would flow into special economic zones. "Most of it will be onhomes, offices and retail," he said.
 
 The company has said in the prospectus that its has identified 62 citiesfor development of various projects. Until April 30, 2006, DLF Universalmade partial payments to acquire 2,893 acres of land across the country.All told, the company is evaluating residential, commercial and retailspace projects of over 118 million sq feet in the country. Real estateconsultants have valued DLF's land bank at Rs 100,000 crore.
 
 The company has said in the prospectus that it is adopting a new businessmodel, based on the development and sale of commercial and retailproperties. Earlier, it developed and leased properties. It believes thenew model will protect it from steep declines in asset values as a resultof market conditions.
 
 In the IPO, the company proposes to reserve 200,000 equity shares forallotment to employees. Of the rest, at least 60 per cent will be allottedto qualified institutional buyers, not less than 10 per cent tonon-institutional investors and not less than 30 per cent to retailinvestors.
 
 Kotak Mahindra Capital Company and DSP Merrill Lynch are the globalcoordinators and book running lead managers to the issue.