DLF plans Rs 1,000cr pre-IPO placement
DLF is planning a Rs 1,000-crore pre-IPO private placement with domestic mutual funds and institutions.
By M K Venu & Javed Sayed, TNN |
NEW DELHI: DLF is planning a Rs 1,000-crore pre-IPO private placement with domestic mutual funds and institutions. With foreign funds barred from participating in pre-IPO placements in the real estate sector, DLF has decided to go for a $200-m plus domestic placement as part of a price discovery exercise for the public issue.
“We plan to raise about Rs 1,000 crore through a pre-IPO domestic private placement. This will help in pricing the IPO,’’ DLF MD Rajiv Singh told ET.DLF’s Rs 10,000-crore plus mega IPO is slated to hit the market either this month or in the first half of next month.
Pre-IPO placement with FIIs, private equity funds, domestic institutions and mutual funds have become a common phenomenon these days. These placement tend to become the valuation benchmark for IPO and play a role in determining the pricing of the public float, which generally happens at a premium to the private placement price.
Official guidelines, at present, prevent foreign investment in pre-IPO placements in the real estate sector, although FIIs have been given the go-ahead to participate in the DLF IPO.
While the commerce and industry ministry has taken the view that foreign funds should be allowed to participate in real estate pre-IPO placements, the final decision in this regard will be taken by RBI and the Securities and Exchange Board of India (Sebi). The department of industrial policy & promotion (DIPP), part of the commerce & industry ministry, feels that investments made by FIIs during a pre-IPO placement is not categorised as FDI.
Therefore, the restrictions imposed on FDI flow into real estate through Press Note 2 of ’05 will not apply to such investments.The recent mayhem in the stock markets has raised a question mark about IPOs but DLF has so far maintained that it is going ahead with its IPO as scheduled.
The proceeds of the IPO will be used to finance land acquisition expenditure, finance construction and development costs of the company’s existing projects, and repay certain loans of the company. While land acquisition will involve an expenditure of Rs 6,500 crore, development and construction costs of existing projects are estimated to be in the region of Rs 3,100 crore.
“We plan to raise about Rs 1,000 crore through a pre-IPO domestic private placement. This will help in pricing the IPO,’’ DLF MD Rajiv Singh told ET.DLF’s Rs 10,000-crore plus mega IPO is slated to hit the market either this month or in the first half of next month.
Pre-IPO placement with FIIs, private equity funds, domestic institutions and mutual funds have become a common phenomenon these days. These placement tend to become the valuation benchmark for IPO and play a role in determining the pricing of the public float, which generally happens at a premium to the private placement price.
Official guidelines, at present, prevent foreign investment in pre-IPO placements in the real estate sector, although FIIs have been given the go-ahead to participate in the DLF IPO.
While the commerce and industry ministry has taken the view that foreign funds should be allowed to participate in real estate pre-IPO placements, the final decision in this regard will be taken by RBI and the Securities and Exchange Board of India (Sebi). The department of industrial policy & promotion (DIPP), part of the commerce & industry ministry, feels that investments made by FIIs during a pre-IPO placement is not categorised as FDI.
Therefore, the restrictions imposed on FDI flow into real estate through Press Note 2 of ’05 will not apply to such investments.The recent mayhem in the stock markets has raised a question mark about IPOs but DLF has so far maintained that it is going ahead with its IPO as scheduled.
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The proceeds of the IPO will be used to finance land acquisition expenditure, finance construction and development costs of the company’s existing projects, and repay certain loans of the company. While land acquisition will involve an expenditure of Rs 6,500 crore, development and construction costs of existing projects are estimated to be in the region of Rs 3,100 crore.
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