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DLF puts off trip to market

Mumbai, Aug. 31: The blockbuster IPO of real estate giant DLF will not turn the turnstiles now as the company postponed the offer and withdrew the draft red herring prospectus. It is learnt that a revised prospectus with updates on the company’s activities will be submitted before Sebi in November.

DLF now hopes to make the initial public offering (IPO) by the end of 2006, pending Sebi clearance of the revised prospectus. (After a company gets the nod from the Sebi, it has to come out with the offer within 21 days.)

DLF had filed the prospectus on May 12, to raise an estimated Rs 13,500 crore. The company proposed to sell 20.2 crore equity shares of Rs 2 each for cash at a premium to be decided by book-building.

DLF had planned the issue for mid-July, but delayed the launch following the tailspin in the markets and allegations of bungling in the rights issue of debentures that opened on December 29, 2005 and closed on January 18, 2006.

DLF had delisted in 2003 and is now seeking fresh listing through the IPO. However, it still had minority shareholders who were up in arms for not receiving the letter of offer for the rights issue that benefited subscribers.

DLF said the letter of the offer was circulated to all the shareholders, and allotment was not made to those who failed to respond to the letter. This fracas delayed the IPO, as Sebi refused to clear the issue pending the views of the ministry of company affairs.

Saurabh Chawla, director, finance, DLF, told The Telegraph,“It has been four months since the draft red herring prospectus was filed. During these four months, there has been a lot of progress in our business.”

He said in these four months, the company has embarked on many new projects and forged more strategic relationships, necessitating an update of the prospectus.

Chawla admitted that the controversy on debentures has delayed the filing of the updated prospectus to Sebi. “The minority shareholder issue is sub-judice. We have responded to the ministry of company affairs and that is exclusive to the DRHP,” he said.

Chawla said the delay will not hurt the company as it has sufficient reserves to implement its plans. The issue proceeds were for land acquisition, construction and loan pre-payment.

Analysts feel real estate shares will take a beating tomorrow. A broker said many scrips had risen, expecting the impending IPO. “The delay may lead to a knee-jerk reaction in these counters tomorrow,” the broker added.

An analyst said DLF will have to reduce its offer price now as investors have grown cautious on IPOs.

The market feels the ministry of company affairs’ take on the debenture brouhaha and the subsequent Sebi response are also critical.

There is a perception that if the ministry favours the minority shareholders, DLF may have to reserve some part of the IPO for them at attractive prices. However, the company has ruled out this possibility.

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