DLF tries to rally from latest blow; observers speculate on extent

The Securities and Exchange Board of India’s (Sebi’s) order to bar property giant DLF and six of its top executives from market trading for three years could prove a big dampener for its business.

Experts say the market leader was already witnessing low sales in the residential segment compared to other developers. Sales were 25 per cent down in the April-June quarter at Rs 1,725 crore, against Rs 2,314 crore in the same quarter last year.

Many brokers operating in Gurgaon say DLF might cut the prices of its units. “Overall, developers are finding it hard to sell their units. The market sentiments have turned positive but sales are yet to happen on the ground,” said an executive from a leading consultancy firm.

In a report, Standard Chartered says the long-term story of DLF remains intact but triggers such as a pick-up in residential sales will now be delayed. The residential sales volume might remain tepid through 2014-15 and recover only in the following year.

The company has been hit badly by a number of recent developments. The Competition Appellate Tribunal upheld a Rs 630-crore penalty imposed on DLF by the Competition Commission of India. Later, the Supreme Court directed DLF to deposit the penalty amount, pending a final order on its appeal. Also, an order by the Punjab and Haryana High Court on cancellation of allocations to DLF has been a big blow.

“We do not expect these to have a long-term negative impact on DLF’s business model but they will remain near-term overhangs on the stock,” Standard Chartered said in the report.

On Monday, Sebi barred DLF, including its chairman, K P Singh, from the markets for failure to disclose sufficient information to investors during its Initial Public Offer (IPO) in 2007 to raise Rs 9,187 crore.

DLF stated, “DLF and its Board wish to reassure its investors and all other stakeholders that it has not acted in contravention of law, either during its IPO or otherwise. DLF and its board were guided by and acted on the advice of eminent legal advisors, merchant bankers and audit firms while formulating its Offer documents. DLF will defend itself to the fullest extent against any adverse findings.”

A DLF spokesperson said, “The order is related to capital markets and has no bearing on our normal business.”