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DLF May Delay Public Offer Till September, People Say

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DLF May Delay Public Offer Till September, People Say - July 5th, 2006

DLF May Delay Public Offer Till September, People Say

July 5 (Bloomberg) -- DLF Universal Ltd., the real estate developer owned by Indian billionaire K.P. Singh, may delay its public offering of shares as market volatility cools investor appetite for stocks, people with knowledge of the sale said.

New Delhi-based DLF, which had planned to raise more than $2 billion this month, will probably sell shares in September, the three people said, asking not to be identified before an announcement is made.

The Bombay Stock Exchange Sensitive Index, or Sensex, which has gained 19 percent over the past three weeks, is still 15 percent lower than its peak on May 10. More than half of the 39 Indian companies that sold shares this year for the first time are trading below their offer price, making investors wary about buying stocks.

DLF's ``story is good, but stability has to be there'' in the market for it to sell shares, said Viswanathan Vasudevan, who helps manage $185 million at Aquarius Investment Advisors Pte in Singapore. ``We are looking at the whole market with big eyes. We have to be cautious.''

DLF's spokesman, Anup Roy, declined to comment today. Officials at the Mumbai-based Securities & Exchange Board of India, the market regulator, declined to comment on whether it had cleared the share sale prospectus.

Investor Concern

At least nine planned share sales were scrapped in Asia last month, including a $1 billion initial public offering by Hong Kong billionaire Vincent Lo's Shui On Land Ltd. Investors pulled out of emerging markets on concern that higher interest rates would constrain economic growth worldwide and crimp companies' profits.

Shares of Deccan Aviation Ltd., India's biggest low-fare carrier, plunged 33 percent in its first trading day on June 12. Deccan has lost 42 percent of its market value. The Bangalore, India-based company raised 3.6 billion rupees ($78 million) in its initial share sale, 16 percent less than it targeted.

DLF hired Merrill Lynch & Co. and Indian billionaire Uday Kotak's Kotak Mahindra Capital Co. to manage the share sale. UBS AG, Morgan Stanley, Enam Financial Consultants Ltd., ICICI Securities Ltd., Citigroup Inc. and SBI Capital Markets Ltd. will also help sell the shares.

DLF is betting that a jump in demand for homes, offices and shopping malls in India will attract investors to its share sale. Accelerating economic growth and easing of rules to allow overseas companies in more industries is generating demand for real estate in the nation with an expanding middle class, estimated by New York-based consulting firm McKinsey & Co. at 216 million people.

`Attractive Opportunity'

DLF ``wouldn't have a problem getting it away because I'd imagine that plenty of people would want to buy that, but it's probably going to be priced lower than it had hoped for previously,'' said Jon Thorn, who manages about $250 million in Indian equities at India Capital Fund Ltd. in Hong Kong.

DLF plans to raise more than $2 billion, a company executive, who asked not to be named because he didn't want to jeopardize regulatory approval for the sale, said on June 13.

Some investors such as Daniel Loeb, chief executive officer of New York's $4.3 billion Third Point LLC, a hedge fund, said DLF may be seeking a price for its shares that may not match the net asset value of its properties.

``The problem with DLF is not market conditions but a management team that is wholly unrealistic about the valuation,'' Loeb said in an e-mail.

DLF's profit more than doubled to 1.99 billion rupees ($43.2 million) in the year ended March 31, from 837 million rupees a year earlier, the company said in its draft prospectus. Sales more than doubled to 12.59 billion rupees from 6.3 billion rupees.

In the draft prospectus filed with the regulator on May 12, DLF said New York-based Cushman & Wakefield, the world's third- largest commercial real estate broker by revenue, has valued 228 million square feet of land owned by the company in 64 locations at between 965 billion rupees and 1.07 trillion rupees.

Biggest Sale?

Should the company raise more than $2.3 billion, the share sale would be India's biggest. It would exceed the 105 billion rupees ($2.3 billion) raised by the Indian government from the sale of a 10 percent stake in Oil & Natural Gas Corp., the nation's biggest explorer, in March 2004.

DLF will use the proceeds to purchase land, fund development and construction projects and repay debt, according to its share sale document.

The developer plans to sell 202 million shares, of which 187.1 million will constitute new stock, the company said in a draft share sale document it filed with the market regulator in April. It has also retained the option to sell an additional 17 million shares. Including the additional shares, the sale would constitute a 12.77 percent stake in the company.

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