Promoters of the company are holding more than 88% of the common stock. However they don't have option to raise money through equity. According to section 77A of the Company Act (buy-back provisions), a company buying back its own shares is prohibited from making further issue of shares (for six months) following the completion of buyback. According to notification dated 15th October, 2008, the company is expected to complete the buy-back process by July 9, 2009. This efectively means that DLF cannot raise money through equity markets untill January 2010.
This is not in favor of DLF especially during (1) times of renewed optimism in equity markets and (2) when peers like Unitech and Sohba are looking to aggresively reduce their balance-sheet leverage by offering additional stock.
No wonder DLF has approached the government to surrender five of its nine IT-ITeS notified special economic zones (SEZ), according to a PTI report quoting a senior Commerce Ministry official. As per the SEZ Act, the tax-free enclaves cannot be surrendered once they become operational. DLF, however, has not started work on the five SEZs that it wants to surrender. Its nine notified SEZs are located in various states. According to official data, the land bank of DLF's nine notified SEZs include 10.61 hectares near Hyderabad, 10.12 hectares in Gandhinagar, 12.06 hectares and 10.73 hectares in Gurgaon, 10.24 hectares in Sonepat, 10.33 hectares in Pune, 10.23 hectares in Bhubaneswar, 13.29 hectares in Kanchipuram and 10.48 hectares in Kolkata. It is not clear which SEZs are now sought to be cancelled.
Furthermore, recent press reports indicate that the firm has decided to shelve plans of its ambitious hotel (sells saket hotel for Rs55 crores) and wind power projects (refer to link http://mergers-in-india.blogspot.com/2009/03/dlf-to-sell-its-wind-power-business.html) for cash constraints
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