The big fat DLF IPO is now over. Subscription details:
What this means is that issue as a whole is fully subscribed, and in all likelihood, both HNIs and retail are going to see full allotment since there is undersubscription in those areas.
Institutions will get partial allotment of their bids, with most going to FIIs.
Now, the FII demand signifies that this stock will most likely get picked up at listing; and retail demand is robust enough for people to pick the stock up as well – Like me, many retail and HNI investors have started to avoid IPOs because of the regular massive oversubscription and locking of money. Also the cost of IPO funding is a deterrent.
I did not cover this IPO during its time because I wasn’t interested in it. But looking at media reports, everyone and their uncle was negative on the IPO. But say what you will, you cannot ignore DLF. They are bigger than the other listed real estate players combined together. Sure, their management has been labelled wonky, and the Singhs have been called all sorts of names. The IPO itself has been postponed a number of times for different reasons, including market tanking, minority shareholder issues, and such.
But the resounding FII response and the massive retail subscription prompts me to think – is it going to be a big listing? My answer is: No. Firstly, in all probability, many (retail) people applied to make minor listing gains because they were sure to get allocation. But that very fact will ensure they don’t have a big listing.
Second, the real estate market, as we know, is largely “black” – at least in Delhi where DLF is king. Now this “black” money routinely flows out of India through the hawala route, and comes back through FIIs as “participatory notes” – something SEBI and the finance ministry know but cannot curb without allowing a huge crash to happen. The black money of Indian bigwigs has perhaps flowed back into the DLF issue, and some of it could even be the black money in the real estate market.
Third, the stock is way to big to be operated. This share, which will likely have futures and options on it as well, will not be able to be manipulated that easily. Many companies rig up with operators to attempt to keep up their stock price – even big companies like Reliance have also supposedly done this at some point – and the Singhs of DLF have the unsavoury reputation for doing such things. Yet, I believe they will not be able to move it up – all they may do is to keep it from going down too much.
The market cap of this company at Rs. 550 will be about 93000 cr. That’ll make it one of the largest companies in India – about seventh or eighth in terms of market cap. This will mean that the stock will soon get added to both the Nifty and the Sensex.
Given all this I don’t believe there will be a huge listing gain, but I don’t think there is much downside either. Perhaps the share will list between 400 and 600 and hang around there until Q1 results of DLF are out.
Why am I not interested in this share?
If you’re invested, I don’t think you should worry – there are good reasons why this stock will not do too badly. But there are a number of better opportunities out there, in the heavyweights – like L&T and BHEL, which, while not being real estate plays, are fundamentally better poised than a DLF.
Overall, the IPO is an eye-opener in terms of the amount of money in the Indian market. Let’s see how it performs. And lets see how ICICI’s mega issue turns out.