Actionable insights on equities, fixed-income, macros and personal finance Start 14-Days Free Trial
Actionable investing insights Get Free Trial

DLF Goes with 525; ICICI Bank between 885-950


DLF has priced its IPO at Rs. 525, which is Rs. 25 short of the higher end of the book building band. This issue is likely to list in July, and will see sure shot allotments to all retail investors, employees and most HNIs. Turns out Merrill Lynch, Deutsche Securities and Lehman brothers (all FIIs) bid for nearly 10,000 cr. together; the FII part was oversubscribed over five times in total (bids for more than 26,000 cr. were in)

Joe Leahy states that the DLF IPO has major issues beyond what I mentioned; it lists risks that DLF is threatened by earthquakes, that 60% of its land is agricultural, that 90% majority owners (the Singhs) can arm-twist the minority (everyone else) . Interestingly that it has, in it’s 60 year history only developed 224 million sq. ft. of land, and in the next two years alone, it plans to 669 m.sq.ft. Possible? Perhaps. Can it sell all of them? We’ll see.

ICICI Bank has a mega IPO coming, and has notified the price band as Rs. 885 to 950. I haven’t fully analysed the issue, but here are some details:

  • About 8750 cr. expected in the Indian market. Same amount in the US market at the same time. Total issue size, along with a green shoe option, is a little more than 20,000 cr.
  • That means around 210 cr. more shares will be issued.
  • As a retail subscriber you’ll get a Rs. 50 discount on the share price discovered. So if it’s 950, you only pay Rs. 900 per share. (Retail = less than 1 lakh paid in the IPO)
  • Retail subscribers can choose to pay in tranches: Rs. 250 per share now, and the rest will be requested in a demand note. Needless to say you can’t sell the shares unless you pay up fully, and you’ll forfeit the shares if you don’t fork up the money within six months.

I don’t know much about where they will use the money, is it worthwhile etc. but on the face of it the valuations look tight. For a dilution of this amount, you can expect massive amounts of liquidity in the market (meaning more shares available to trade) and given that this is an index stock (both Nifty and Sensex) the movement is not going to be huge. Don’t buy for listing gains – you won’t get much.

I’m not a great fan of their business because of the umpteen complaints the bank has seen, including a personal experience. Other bad news is that today they announced the slowdown in home loan growth – which forms nearly 50% of their retail portfolio. They’re priced higher than SBI (on a p/e basis) which may also see an IPO of sorts this year. And lastly, I feel they are in the peak of investor sentiment; in the face of rising interest rates, higher CRR/Repo rates, lending restrictions to real estate etc. it is probably not the best future to have. For them of course, this is the best time to get money – when people are blinded by the lure of even higher levels.

Be careful, folks. This is not the peak yet, and we still have to see the buildup of massive exuberance. But it seems to be coming. Be wary, and keep your stop losses handy.


Like our content? Join Capitalmind Premium.

  • Equity, fixed income, macro and personal finance research
  • Model equity and fixed-income portfolios
  • Exclusive apps, tutorials, and member community
Subscribe Now Or start with a free-trial