DLF buyback: should you sell?

DLF board on Thursday approved buyback of up to 2.2 crore shares at price “not exceeding Rs 600”. The company has allocated Rs 1,100 crore for the buyback. At Thursday closing of Rs 459, DLF shares closed 12 per cent below its IPO price of Rs 525. The question arises, should you sell?

“The intention of the offer is to send the message that equity price of the company is undervalued and if someone is thinking of selling DLF he can do so at upto a maximum price of Rs 600,” said Ketan Karani, vice president research, Kotak Securities.

Fundamentally, there is nothing wrong with DLF. “But the sector is under pressure and may see a hit on margins over the next one to two years,” said Manish Bandi, vice president, India Infoline. “Investors with 1-2 year horizon can cash in on the offer. But if the horizon is 3-5 years, they should hold on as the real estate theme is yet to emerge.”

The company’s IPO was priced at Rs 525 per share, and the shares soared to a life-time high of Rs 1,225 on January 15 this year. However, the stock has been on a downslide since then and hit a life-time low of Rs 350.30 on July 2 — the day the company first announced its intention to buy back the shares. Following the announcement, shares rose sharply by about 15 per cent that day.