HSBC raises target price of DLF to capture deal-implied asset value

December 14, 2017

Promoters are set to infuse funds post completion of commercial assets.

Global investment firm HSBC has raised target price of DLF, the real estate firm, to Rs 217 (from Rs 185 per share) while maintaining a hold rating on the stock due to weak real estate market environment.

“The target price is hiked to capture deal-implied asset value and the renewed focus on business,” the research house said.

According to HSBC, large inventory would take 4-5 years to be sold as the real estate market environment remains weak.

The research house cut earnings estimates for FY18/19 by 60 percent. Quick monetization of ready inventory is an upside risk, it said.

The cash infusion by promoters will improve balance sheet strength and will allow promoters to follow the business strategy of their choice, it feels.

Promoters are set to infuse funds post completion of commercial assets, HSBC said.

DLF in its extraordinary general meeting on December 27 will consider the plan of cash infusion through convertible warrants.

Recently the board approved fund infusion of around Rs 15,000 crore in the company through the preferential issue of Rs 11,250 crore to promoters and qualified institutional placement of around Rs 3,750 crore.

Promoters will infuse cash through allotment of compulsorily convertible debentures, and warrants with an exercise price of Rs 217.25 per share.

At 11:48 hours IST, the stock price was quoting at Rs 234.70, up 0.34 percent on the BSE.

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