The Hindu Business Line : New floor plan

For a variety of reasons, the significance of the success of the initial public offer (IPO) of shares by the Delhi-based DLF Ltd. goes beyond that of a company raising money from the investing public to finance its business plans. One, it demonstrates a capacity of the Indian market to absorb large sums of money in a primary offering without undermining liquidity elsewhere in the system. This augurs well for companies, both seasoned and debutants, planning to hit the market with ambitious offerings of capital. Two, DLF after all, belongs to an industry that is still largely unorganised and not particularly known for conducting its business on scientific principles. There were also concerns over pricing of the shares.

Yet, a large set of retail investors came forward to support the offering that saw the retail portion being almost fully subscribed. In the event, the successful outcome also signals the retail investor becoming sophisticated enough to take informed decisions on investments, no matter that some of that may not come good. Lastly, the large support the issue got from the Foreign Institutional Investors suggests that overseas money is prepared to come in passively where regulatory fetters deny FIIs the opportunity to manage their investments directly.

The real-estate industry has in no small measure suffered from the entry of underworld and criminal elements with the backing of the political class. Its access to money from the banking and the more traditional sources of finance has been limited because of the uncertainties over land records, the stifling controls on development imposed by the municipal authorities, and the corruption that is all pervasive. It would be too much to expect that the success of DLF in mobilising public money can change overnight the industry's character from one lacking in public image to be counted as among the elite of the industrial economy. But there is no doubt that the event holds the promise of such transformation. After all, not many gave either Infosys or the information technology sector much of a chance when the former tapped the market for public funds.

Yet, nearly a decade and half later, the information technology sector enjoys the reputation of being a shining example of Indian entrepreneurship. Together with the construction industry it accounts for a sixth of the national output of goods and services. Its employment is one of the highest in the economy. There is huge shortage of housing among the middle and poorer sections. In the IT sector's case, a policy of benign neglect worked wonders. But the real- estate sector perhaps needs active policy intervention to dismantle entry barriers for the organised sector to build on. Given such stakes, it deserves nothing less.

More Stories on : Editorial | Real Estate & Construction | IPOs

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Reviving the EU Constitution: Poland seeks electoral multiplier from square root formula

New floor plan

Motivating the motivator

US Fed: Between Scylla and Charybdis

Measuring CSR of India's corporates

Reverse mortgage