The Delhi Land and Finance IPO: To Be or Not to Be?

DLF was the largest real estate player in India, possessing a strong home market in Delhi and Gurgaon (the National Capital Region, NCR). The Indian real estate market was growing rapidly, and DLF wanted to convert this growth opportunity into a country-wide presence by building significant land reserves. With huge debt on its balance sheet, the company decided to raise finance through equity. The stock markets were on a rise, and the timing was perfect to raise funds from an initial public offering (IPO). The company filed its draft red herring prospectus (DHRP) in May 2006, but soon afterwards the stock market scenario changed, and the company faced complaints from its minority shareholders. The global macroeconomic scenario had become a cause of concern too. DLF was forced to withdraw its DRHP and put its IPO plans on hold. This case is positioned in January 2007, when DLF had resolved its minority shareholders’ issue and had added significant portions to its land reserves. At that juncture, DLF’s management began the process of trying to gauge the circumstances before reintroducing its decision to go public.

<ul><li>To understand the issues and challenges of going public, from a company’s perspective.</li><li>To apply and appreciate the valuation methods for IPO pricing, using Multiples and Discounted Cash Flow (DCF) Method.</li><li>To apply and appreciate alternative methods of valuation, using the Economic Value Added method.</li><li>To appreciate the concerns and perspectives of the various stakeholders of an IPO process, with regard to market-specific and company-specific circumstances.</li><li>To assess the link between a company’s growth strategy and its financial decisions.</li></ul>

• Initial public offering
• financial valuation
• Indian economy
• global macroeconomy
• India