Investors should avoid DLF

DLF - a sinking ship

DLF  - a  sinking  ship
DLF - a sinking ship | Source

Avoiding Investing in DLF


Quite Popular Because Of IPL

DLF has become quite popular after it sponsored the five editions of the IPL cricket T20 tournament which has become quite a hit among the cricket fans. In fact DLF has become synonymous with cricket and many people have no idea that the company is in fact a real estate major. DLF has spent more than Rs.200 crores for sponsoring IPL. DLF’s debt has soared and sponsoring IPL has become more expensive. Therefore there are inside rumours that DLF may not sponsor the sixth edition of the tournament.

Too High Borrowings

For pruning down its debt, DLF has sold its subsidiary Adone Hotels and Hospitality to a Kolkata-based consortium namely Avani Projects & Square Four Housing & Infrastructure for a whopping Rs.567 crore. Income Tax Department has raised a Rs.1180 crore demand on the DLF Group for which the company has not made any provisions in its books. Veritas Investments report has stated that the DLF stock is not worth for more than Rs.100 in the stock market. There is a myth created among the investors and general public that DLF is one among the corporate pillars of India. Veritas Investments report speaks that DLF inflated its sales by at least Rs.11236 crore ($2607 million) and its profit by Rs.7233 crore ($1690 million) from 2007-2011. Veritas is a Canadian based research firm. Had it been an Indian research firm, DLF would have bought the report through money and made the report look attractive. Indian brokerage and research firms can be bribed easily. But it is more difficult to bribe foreign research firms. According to the Veritas report, DLF is a crumbling edifice. Therefore investors will do well to avoid it and not to fall into the trap set by the glamour of IPL.

Probe Will Be an Eyewash

Following the report, the corporate affairs ministry has ordered probe into the DLF books of accounts. DLF has denied the Veritas report as untrue. Probably Kapil Sibal may also deny Veritas report as untrue. But both DLF and Kapil Sibal have not replied to the allegations levied by the Veritas report. After performing well in the first two quarters of the financial year 2011-12, DLF saw its Q3 sales dipping by 18%. Despite non-core asset sales amounting to Rs.1200 crore, DLF failed to bring down its borrowings. The company saw its net profit plunge by as much as 45% in Q3. DLF has planned to sell its wind power business and convention centre for Rs.1800 crore to bring down its debt. M3M, a real estate developer, has purchased 28 acres of DLF land in Gurgaon for Rs.440 crore. Blackstone has bought the Pune IT SEZ for Rs.810 crore from DLF and Hubtown, the partners of the venture.

Promoter Almost Sold His Stake

SEBI has ordered a probe against DLF for allegations of cheating a New Delhi-based businessman for Rs.34 crore in collusion with its associate firm Sudipti Estates. DLF has bought Hilton’s 26% stake in its hotels venture DLF Hotels & Hospitality. This has made DLF a 100% shareholder in the hotel. DLF received its first tranche of Rs.200 crore from IDFC for selling its joint venture Galaxy Mercantile Ltd. It is a joint venture between DLF and 3C. DLF promoter and Chairman K P Singh almost sold his entire stake in DLF in 1975 for Rs.26 lakhs which was a huge sum in those days.

NTC Mills Land

DLF has got a stay order last year on the Rs.630 crore penalty levied by the Competition Commission. DLF has struck a deal with US retail store Claire’s which is a leading fashion jewellery and accessories. DLF will be selling the latter’s brands in India. Last year there were many bidders to buy DLF’s Aman Resorts International which is a luxury hotel chain. Bidders included China’s HNA. DLF has decided to sell its prized possession NTC Mill land. The land is spread over 17.5 acres and is located in Central Mumbai. It may fetch DLF around Rs.3500 crore.

Sonia Gandhi Will Protect DLF

DLF is in deep trouble because of many allegations against it. Its borrowings are too high. Veritas report has damaged the company’s reputation. But still, DLF will wriggle out of all the troubles because of two reasons. Firstly, the officials and politicians in India are corrupt to the core and it is easy to buy them with money. Secondly Robert Vadra, son-in-law of Sonia Gandhi is interested in the company. He has tied up with DLF to buy land in Haryana. Robert Vadra wants to make huge profits in the real estate business with the assistance of DLF. Therefore DLF enjoys the full protection of Sonia Gandhi the same way as Quottrochi enjoyed it and escaped from all allegations related to the Bofors scandal.

Investors Should Avoid the Company

But investors should not burn their hands or fingers with the DLF stock. Investors should avoid investing in the company and should park their funds with good shares like Tata Motors, State Bank of India etc.

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