Three-year market ban sinks DLF shares below book value

Written by fe Bureau | Mumbai | Updated: Oct 15 2014, 06:36am hrs
Shares of DLF fell far from their book value on Tuesday as the streak of negative regulatory events continued for the real-estate player with the Securities and Exchange Board of India (Sebi) barring the company and its promoters from capital markets for three years on Monday.

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The stock ended 28.46% lower on the BSE, at its all-time low of R104.95, whereas the value of the shares in the companys books stood at R153.778, showed Bloomberg data.

Analysts say the Sebi order could derail DLF's deleveraging plans and also hurt the company's image. Aside from derailing DLFs publicly announced plans of deleveraging itself (net debt levels of R19,000 crore as of June 2014) and substantially raising the indebtedness of the business as well as the cost of debt, this order is likely to cause collateral damage raising a question of unknown unknowns for investors in DLF, Ambit Capital said in a note.

The promoters wealth declined by R5,572 crore. The companys net debt-to-equity ratio stands at 0.65 as on year-ended March 31, 2014. The selling pressure cut down the difference between the market cap and net sales of DLF with the market cap falling by R7,440 crore. The Gurgaon-based company clocked net sales of R8,280 crore in FY14.

DLFs markets cap stood at R26,141 crore on Monday. By the end of Tuesdays trading session, its market cap had fallen to R18,701 crore.

Proxy advisory firms question whether the company should still be part of Nifty. A ban from capital markets for a period of three years is indeed serious. Given this, we question whether DLF should remain a front-line index stock Being part of the CNX Nifty, DLF attracts several equity retail and institutional shareholders. Index funds will also be required to hold the stock in the almost the same measure as its weight in the index. But, with the recent SEBI order, markets must question whether it should remain a constituent of a principal index, Institutional Investor Advisory Services said in a note.