Mumbai: The DLF IPO, which opens on June 11, has been priced at Rs 500-550 per share. It has an issue size of $2.2-2.4 billion and a market cap of $21-23 billion.
Dipan Mehta, Member of BSE and NSE, thinks that the response will be quite good for the realty major's IPO and is not worried over the fact that it is almost a Rs 10,000 crore issue, the reason for which is that there is adequate liquidity and also, because many investors are still underweight on the real estate sector.
He considers DLF as amongst the best real estate companies within India; so he sees it getting good response from domestic investors as well as overseas investors.
Following is the excerpts from the exclusive interview with Dipan Mehta:
Q: The price band of DLF is Rs 500-550 and $2.4 billion is what they are looking to raise from the market. Do you think they will be able to garner this kind of money? What is the expectation of how this IPO would be taken in terms of response from the market?
A: I think the response will be quite good for DLF and the fact that it is almost Rs 10,000 crore or thereabout issue is not a matter of concern at all. The reason is that there is adequate liquidity and the sector in which DLF is - real estate - a lot of investors are still underweight over that and there is a good appetite for good quality paper and I think DLF is amongst the best real estate companies within India so this issue will get good response from domestic investors as well as overseas investors.
Q: Particularly on the institutional side we have seen almost about $450 million odd being pumped in from January to May between mutual funds and FIIs. Do you think that kind of institutional support in appetite would be garnered by this single issue, which hopes to reckon money much higher than what we have seen in terms of inflows into the market?
A: Yes, I think so and our experience is that liquidity generally is there when there is quality and certainly there is quality in the DLF IPO. 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. Some of their land banks are in premier locations and if you see the kind of profit per square feet, which they have been able to derive over the past few years, is amongst the highest within the industry. Also, I think the execution capability is something that many investors are looking at very closely in identifying stocks in the relative sector and DLF certainly has a great track record in terms of execution; so, to that extent this stock will trade at the premium end within the industry.
Q: What kind of a premium listing do you expect. It is very early days, but at what levels would you say people who have got the stock should continue to hold at? What levels would you expect or would you ask people to continue to buy the stock at? What levels would you expect people or want people to sell off to make a quick buck?
A: I think that real estate is not for the short-term players, because this business is not linear; you are going to have quarters, where profits are going to be down and there will be quarters that will have fantastic profit growth, because the revenue flow is going to be always volatile, which one needs to take into account when investing in real estate stocks. Having said that I think around these levels, at about Rs 550, most retail investors will get decent allocation given the size of the issue and when they apply for it, I think it should be a bit of a long-term kind of an investment; keep it as part of the core holding and hold on for 2-3 years or so.
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