DLF feels the heat of probe talks

Written by fe Bureau | Mumbai | Updated: Oct 28 2014, 07:10am hrs
The shares of DLF declined more than 8% on Monday after the newly elected BJP government in Haryana said it will investigate all land deals, including those between Robert Vadra and the Gurgaon-based real estate developer.

The shares of DLF ended at Rs 110.50 on BSE, down Rs 9.40 or 7.84% most in two weeks. The stock is now trading at 0.76 times the price to tangible book value of Rs 144.66 per share, Bloomberg data showed. On October 14, DLF shares plunged 28% to an all-time low of Rs 100 after the Securities and Exchange Board of India (Sebi) had barred the company and six top officials from accessing capital markets for three years.

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The severe drubbing in the market has eroded the company's value by Rs 6,450 crore since October 13. The promoter and promoter group, who own 74.91% in the company, have lost Rs 4,831 crore in the last two weeks. The value of shares owned by overseas investors declined by Rs 1,270 crore.

Cabinet minister Anil Vij said the new Haryana government was committed to probe acquisition of 70,000 acres during the 10-year regime of the Congress government. We would inquire whether the land was used for the purpose it was acquired. It would be probed if there was any violation of law in acquisition to benefit any individual, sid Vij.

In July, then chief minister Bhupinder Singh Hooda had legalised the controversial land deal between Vadra-owned company Skylight Hospitality and DLF.

Barclays Securities (India) analyst Saurabh Mishra said that regulatory hurdles pose the risk of slower-than-expected sales volume, and a prolonged high interest rate environment could impact debt servicing capabilities. DLF targets new sales of 7.5 million square feet (msf) in FY15, it sold only 0.4 msf in Q1FY15, and it will be difficult for DLF to meet its guidance of Rs 3,000-3,500 crore in new sales in FY15 (Rs 4,070 crore in FY14) due to weak demand.

We believe this (the Sebi order) along with other recent adverse regulatory rulings and weak demand environment do not augur well for DLF. While valuations appear cheap (0.9x FY16e book), we maintain equal weight rating and reduce our target price. We believe the Sebi order can potentially impact CCPS (compulsory convertible preference shares) conversion plans of DLF, said Mishra.

DLF's debt stood at Rs 19,000 crore as of the quarter ended June 2014. The company, which owed lenders Rs 21,350 crore at the end of December 2012, had sold three of its non-core assets a premium land parcel in central Mumbai's Lower Parel, luxury hotel chain Aman Resorts and its wind energy business mopping up Rs 4,889.2 crore. DLF also raised Rs 1,863 crore through an institutional placement programme in May last year to comply with Sebi's shareholding norms.

The Supreme Court in August had ordered DLF to pay upfront a deposit penalty of Rs 630 crore in a case against the Competition Commission of India. Moreover, the Punjab & Haryana High Court had cancelled allotment of 350 acre land to DLF in September 2014 on grounds that the allotment was not transparent. DLF's upcoming project Mall of India in Noida, projected to be one of the largest in the country, has been served a notice to stop all construction activities till a clearance from the National Board for Wildlife is obtained. The notice has been served by the UP pollution Control Board.