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SEBI Initiates Proceedings Against DLF

Securities and Exchange Board of India (SEBI) has initiated penalty proceedings against DLF and its promoters. Minister of State for Finance Jayant Sinha said that the SEBI has passed orders against 8 companies for non-disclosures of material information in their red-herring prospectuses, of which DLF is one.

This recent trouble that DLF is in started on October 13, when SEBI banned DLF ltd. and 6 of DLF’s officials, incl. their chief promoter KP Singh, from accessing the capital markets for 3 years. SEBI found them guilty of not disclosing material information during DLF’s IPO, mostly related to the existence of 3 of its subsidiaries: Sudipti, Shalika and Felicite. DLF reverted saying that these associations were not material, in that the non-disclosure did not have any great impact on their numbers.

This is not the first such incident. In 2011, The CCI had slapped a Rs. 630 cr. penalty on DLF. CCI alleged that in Gurgaon, DLF had abused its dominant position in the realty industry to work agreements in their favour, thus violating rules.

Of the Rs. 630 cr. fine, DLF has paid only Rs. 150 cr. so far. The SC in a recent order allowed DLF to pay the remaining Rs. 480 cr. in instalments starting January next year. To put these numbers in perspective, let’s look at their recently announced Q2 earnings. They had revenues of Rs. 2,013.2 cr., and a Net Profit of Rs. 109.1 cr. during Q2 2015.

Let’s look at the time-line of high-profile events related to DLF since that ban was imposed:

  1. 2011: CCI finds DLF guilty of abuse of its dominant position; fines the company Rs. 630 cr.
  2. Oct 13, 2014: SEBI bans DLF and promoters from the capital markets.
  3. Oct 14, 2014: DLF shares tank 28.46% as a reaction to the news.
  4. Nov 05, 2014: SAT allows DLF to redeem MF investments of Rs. 1806 cr.
  5. Nov 28, 2014: SC allows DLF to pay remnant Rs. 480 cr. in instalments.
  6. Dec 03, 2014: SEBI initiates proceedings against DLF.

DLF’s shares are currently trading at Rs. 155.50, up 1.34% from yesterday’s close of Rs. 153.45.

Disclosure: (Analyst and Associates) No positions. No positions at end of prior month. No material conflict of interest. No compensation or other benefits received from companies covered in this report. We do not manage public offerings of securities. Analyst was never employed by, and has never been involved in market making of companies covered in this report.

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