DLF Shares Sink on Sebi's Ban on Fund Raising

DLF shares fell as much as 30 per cent on the National Stock Exchange on Tuesday, a day after market regulator Securities and Exchange Board of India barred the realty major and six of its top executives from tapping the capital markets for three years. (Track stocks)

The carnage in DLF shares led to Rs 7,126 crore-loss in the company's market value. DLF was the top loser in the 50-share Nifty. DLF is part of the derivatives segment, so there is no cap on how much it can fall in a single trading session. Other realty stocks also fell tracking sharp losses in DLF. The BSE's realty sub-index traded 9 per cent lower as compared to flat trade in broader markets today. (Latest share price)

Sebi's decision, billed as the toughest punishment on a big company to date, means DLF will not be able to raise money from the securities markets. India's largest listed property developer will not be able to raise money through equity (shares) or bonds, analysts say. (Read full story here)

DLF, which has about 26 million square feet of leased assets in the country, will also be barred from listing a Real Estate Investment Trust (REIT). Sebi finalised rules for REITs last month.

REITs, which invest mainly in commercial property and pay rent from their property to shareholders as dividends, provide developers with a new avenue for funding, allowing them to effectively sell finished commercial buildings to investors. (All you want to know about REITs)

The ban will be a body blow to the company, analysts say, because DLF is struggling under a massive debt of Rs 19,100 crore.

"This is the first time that such kind of an order has been passed on a company that is part of Nifty... It is unprecedented," said Amit Tandon, managing director of IIAS.

The ban follows what the regulator said was DLF's failure to provide key information on subsidiaries and pending legal cases at the time of its record-breaking 2007 initial public offering.

In a 43-page order published on Monday, regulator SEBI said DLF, its billionaire founder and chairman Kushal Pal Singh and five other company executives would be barred from "buying, selling or otherwise dealing in securities".

"As far as non-disclosure cases are concerned, this is the biggest case in SEBI's history and this is by far the biggest punishment they have imposed," said J.N. Gupta, a former executive director at the regulator who now runs a shareholder advisory firm.

DLF raised over Rs 9,000 crore in 2007 at the height of the pre-financial crises euphoria, in what was then India's biggest market debut.

"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 initial public offer or otherwise," the company said in a statement late on Monday. (Read: DLF Says Will Defend Itself Against SEBI's Order)

The property giant said its board was "guided by and acted on the advice of" its legal advisors, merchant bankers and audit firms while preparing the offer documents, and that it would defend itself against the order passed by SEBI.

DLF shares ended 28 per cent lower at Rs 105.80 a piece on NSE underperforming the Nifty which closed 0.26 per cent lower on Tuesday.

(With inputs from Reuters)