The Securities and Exchange Board of India’s ban on the country’s largest property developer, DLF, means the company could now struggle to pay down its debt using equity or debt instruments regulated by the market regulator. Its debt, which swelled as the firm ramped up land acquisitions before the financial crisis, stood at Rs.19,100 crore ($3.13 billion) at the end of June.
The ban, a blow to the heavily indebted real estate firm, 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.
A DLF spokesman said the company was reviewing the order, but declined to comment further.
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“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 $2.3 billion in 2007 at the height of the pre-financial crises euphoria, in what was then the country’s biggest market debut. New Delhi-based DLF builds homes, offices and shopping centres, and is now developing a 1.9-million square-foot retail mall close to the capital, which is expected to be the biggest in the country when it is completed next year.
DLF founder K. P. Singh, ranked 505 on the
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The company, which has about 26 million sq. ft. 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.
“It will not have access to the REIT market for 36 months, and given DLF’s large portfolio of commercial assets across the country, it would have been one of the biggest beneficiaries of REITs,’’ Anubhav Gupta, sector analyst at Maybank Kim Eng India, said. DLF has already run into regulatory trouble.
Earlier this year, the Supreme Court upheld a Rs.630-crore ($103.3 million) fine against the company imposed by the anti-trust watchdog. It has also been at the centre of a political controversy over sweetheart land deals. The decision by SEBI marks its latest effort to bare its teeth.
Earlier this year, the regulator singled out a Hong-Kong based hedge fund as the target of its first major trading probe, and had debuted new laws to improve disclosure standards among corporates in India.
“I think it is a bit harsh ... but the regulator is on a spree to set an example in the market,’’ Mr. Gupta