According to a DLF spokesperson, This is a normal procedure to raise money. We need the shareholders approval to raise money. This process authorizes us to raise money upto Rs 10,000 crore.
The real estate company may not raise the absolute amount. It may raise funds for a smaller amount. The resolution is valid for one year, until the next AGM takes place.
With a size of Rs 84,909 crore DLF is the largest real estate company in India. In July this year DLF said it would buy back up to 2.2 crore shares at a maximum price of Rs 600 per equity share. It has allocated Rs 1,100 crore for the purpose, and would be financing the same through internal resources.
The company is planning to buy the shares through open market purchases through the stock exchange route. The buy back of shares will help increase the earning per share (EPS). This will also lead to a reduction in the price earning (PE) ratio. A lower PE always pushes up the stocks. High stock prices always work to a company's advantage when it wants to raise funds.
The buyback proposal follows a sharp dip in the company's market value over the recent past, which saw its share price plunging to below the issue price of Rs 525, at which the company had sold shares to public about a year ago.
At one point of time, the shares were trading at over double the public offer, but it has dropped to less than half of the life-time high of Rs 1,225, scaled on January 15 this year.
If DLF buys back the entire 2.2 crore shares as planned, the holding of its promoters, KP Singh and family, would rise to about 89.5% from 88.2%.
DLF is developing various projects in Gurgaon, Chennai, Indore, Rajarhat and Kochi.