The Hindu Business Line : `DLF IPO to make India a property-driven stock market'

Report card
Listing of DLF means that the property story is likely to become more mainstream
It will serve as a catalyst for fund managers in India to look more at asset-based investing

Mumbai , April 25

The proposed $2-billion initial public offering (IPO) by the Delhi-based real estate developer DLF Ltd will make India a property-driven stock market like Hong Kong and Tokyo, said foreign brokerage and investment banking firm CLSA Asia-Pacific Markets.

In its latest report, CLSA said the listing of a big cap like DLF would also ensure that the stock gets included in benchmark indices in due course. This, in turn, would lead to the hiring of specialised property analysts for the first time in the stock market, it said.

"The listing of DLF will mark the formal confirmation that India has become a property-driven stock market like Hong Kong, Tokyo and many other markets before it. But if this means the story has now been recognised, it certainly does not mean the end of the trade. All this means that the easy money has already been made. There is still a lot of potential for the property boom to run further," the report said.

This is very important as Indian investors, with an index mandate, have not been able to play the asset-inflation story in a meaningful manner, precisely because the index reflects history and historically India has never had a property boom, the report pointed out.

"The lack of legitimate property plays with transparent corporate governance has also caused conservative investors to shun the property and land plays to their detriment in performance terms. Still, the listing of DLF means that the property story is likely to become more mainstream. It also will serve as a catalyst for fund managers in India to look more at asset-based investing, and not just at earnings," the report said.

Drawing investor attention

CLSA also stressed the importance of, now-largely unrecognised, land or asset-play components among most Indian blue-chip companies. As domestic boom in real-estate prices continues, this would inevitably start to draw increasing investor attention. One example is Infosys, which is said to own 800 acres of land. Another example is ITC. And another is State Bank of India and other State-owned banks which house their employees in "true paternalistic fashion in the equivalent of corporate dormitories," the report titled `Greed & Fear', said.

CLSA said India's domestic fund managers, after protracted scepticism, have begun to sense the potential power of this asset-based investing. Noted players in the sector Unitech, Bombay Dyeing and Bata India have risen by 9,199 per cent, 1,206 per cent and 646 per cent respectively since the beginning of 2003.

"It remains the case that the research reports have yet to be written by the stock-broking industry analysing the land holdings of Infosys or other blue-chip corporates."

But, CLSA said, it has a "little doubt that such reports will be written in the next few years."

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