The company's board is meeting on July 10 to finalise the details of the buyback offer, a year after it debuted on the stock market.
A combative Ramesh Sanka, 46, tells Siddharth Zarabi why the company has opted for a buyback and whether it had the liquidity to undertake this offer. Excerpts:
Why do the buy back now? Critics say it is a desperate move and not really called for. How do you react to it?
In both good and bad times, we will do things that are good for the company and its shareholders. We are not a company that decides strategy on the basis of newspaper articles or analyst comments.
On the timing, can someone please tell me what has changed in the last six months on the macro-economic front that there should be so much panic?
Yes, there is inflation, a cost push that is a worldwide phenomenon. But, despite this we will have between 7-7.5 per cent growth (in GDP) this year and it is nothing to laugh at. We cannot appreciate why there is panic.
Sentiment for realty stocks is down and the mood is pessimistic.
A gloom and doom scenario in real estate does prevail, but people have to differentiate between companies and projects. They are not doing that. DLF is different. It is the number one company and the only one in India with 90 per cent of its land bank paid for already.
We are also not borrowing at more than 13 per cent, while others are doing so at much higher rates. We believe in our company, our brand, our strength and the growth potential. So should investors.
So, is the buy back dictated by that?
The best way to demonstrate our belief in the company and the industry is to support our share. This will send out a signal that we have excess cash flow.
People will understand the true value of our asset base. How can the land bank of a company, say 1000 acres, that is almost fully paid off be equated with that of another company which has barely paid even 10 per cent of the cost? We want to show that we are generating cash flow.
Given that DLF's promoter stake is over 88 per cent, how will buying back less than 2 per cent of floating stock help?
As per law, a listed company has to have 10 per cent floating stock at all time to remain listed. Leaving this aside, look at the facts. Every 1 per cent of DLF is worth $200 million or Rs 800 crore.
If I buy all this or less, it only shows that I have the strength to do so. We are not facing a liquidity crunch; otherwise we would not have given 200 per cent dividend, Rs 1,200 crore, from last year to now.
The intent (of the promoters) is to show that we know our company and that the prevailing share price does not reflect the true value of the company. Our results will soon convey the real picture of our strength.
