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DLF to Buyback its Shares…SEBI should ensure it’s properly done

With share prices,especially of Real Estate Stocks arguably falling  even below the  Dead Sea Level (that’s below Sea Level and therefore sinking or drowning),Investors have seen quicksand erosion of wealth…DLF to shore up confidence has announced a Buy back IntentionThey plan to buy back their shares …this can be through Open Market operations upto a predecided Share price and Fund Size Limit or they can issue a tender invitation to existing shareholders to submit their shares for Buy backat a decided price.

There is no harm in this exercise except for the fact that DLF has just raised funds in 2007 through an IPO at Rs 525 per share…over 88% of the equity is with the promoters,whose holding cost is virtially free, and they need atleast 10% floating stock to remain listed…SEBI should ensure that only cash from operating profits are used to buy back shares and not cash received from premium in the IPO and other placements…this would not be correct as Buy Back of Shares was never and  could not be an object to the issue and it would be unfair to shareholders who supported the Primary Issue at a price of Rs 525 when the market price is below this

DLF can buy back less than 2% of the equity only but the outlay for this could easily be Rs 1500 crs  

Reproducing our take in “SCRIPTECH SCAN” on the DLF issue in June 2007 in the price band of Rs 500 to 550  

“One thing is sure,the promoter and promoter group stake of  87.43 % post equity will be worth Rs 82000 crores or US $ 21 Billion at top end of the price band.Chief Promoter,Mr K P Singh holds just 0.61 % stake in his personal name…that would mean he would be directly worth Rs 575 crs on this stake and indirectly worth much more as most of the promoter stakes are through Investment,Real Esate and Housing Companies…what a fantabulous bonanza,especially if you consider that the last Capital structuring was way back in 1989 when the equity was Rs 3.51 crs and the next change came only in March 2006 lastyear on Conversion of Debentures when equity shot to Rs 37.76 crs which in just two months in May 2006 shot to Rs 302.15 crs on a liberal bonus issue after a split in face value from Rs 10 to Rs 2.
 
In other words,the promoters have paid really nothing much in their contribution to the equity but they will be worth Rs 82000 crs later this month ! 
 
In other words thay have nothing to lose really…only you have if the price falls in the short term to below Issue Price! “

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1 thought on “DLF to Buyback its Shares…SEBI should ensure it’s properly done”

  1. Pingback: DLF's K P Singh & Robert Vadra realise that "Hips Don't Lie" | Gaurav's Blog

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