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According to media reports, the Competition Commission of India (CCI)
has stated that DLF has abused its dominant position in Magnolias (luxury
project in Gurgaon). The order is in line with earlier orders against the
company with respect to its projects in Park Place and Belaire, also in
Gurgaon. The earlier order had imposed a penalty of INR6.3bn and
directed DLF to ‘cease and desist’. The company had earlier appealed
against the judgment to the Competition Appellate Tribunal (CAT), post
which it can approach the Supreme Court. If DLF loses the case, it will
have to pay the penalty along with 9% interest. We continue to maintain
that asset sales / debt reduction will be the key to stock performance and
maintain ‘HOLD’.
Event: DLF asked to scrap unfair clauses in Magnolias agreements
According to an order dated January 31, 2012, CCI has asked DLF to desist from
formulating and imposing unfair conditions in its agreements with buyers in Gurgaon
and to ‘suitably modify unfair conditions imposed on buyers’ within a period of three
months from the receipt of the order. CCI had earlier passed similar orders for two
other DLF projects—Park Place and Belaire. However, the CCI has not imposed any
fresh penalty on the company as it had already imposed a penalty of INR6.3bn earlier in
its Belaire project at Gurgaon (NCR). Magnolias is a group housing project launched in
August 2005 which originally consisted of 19 buildings of 17 storeys, which was
subsequently increased to 22‐26 storeys.
Impact: No cash outgo seen; maintain ‘HOLD’
In our view, DLF has the option of appealing against the CCI order in CAT and
subsequently, in the Supreme Court. As the current order does not impose any fresh
penalty, we see no incremental cash flow impact on account of the same. We believe a
broader impact of the CCI order is that future buyer‐seller agreements may be more
equitable considering interests of both parties.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
According to media reports, the Competition Commission of India (CCI)
has stated that DLF has abused its dominant position in Magnolias (luxury
project in Gurgaon). The order is in line with earlier orders against the
company with respect to its projects in Park Place and Belaire, also in
Gurgaon. The earlier order had imposed a penalty of INR6.3bn and
directed DLF to ‘cease and desist’. The company had earlier appealed
against the judgment to the Competition Appellate Tribunal (CAT), post
which it can approach the Supreme Court. If DLF loses the case, it will
have to pay the penalty along with 9% interest. We continue to maintain
that asset sales / debt reduction will be the key to stock performance and
maintain ‘HOLD’.
Event: DLF asked to scrap unfair clauses in Magnolias agreements
According to an order dated January 31, 2012, CCI has asked DLF to desist from
formulating and imposing unfair conditions in its agreements with buyers in Gurgaon
and to ‘suitably modify unfair conditions imposed on buyers’ within a period of three
months from the receipt of the order. CCI had earlier passed similar orders for two
other DLF projects—Park Place and Belaire. However, the CCI has not imposed any
fresh penalty on the company as it had already imposed a penalty of INR6.3bn earlier in
its Belaire project at Gurgaon (NCR). Magnolias is a group housing project launched in
August 2005 which originally consisted of 19 buildings of 17 storeys, which was
subsequently increased to 22‐26 storeys.
Impact: No cash outgo seen; maintain ‘HOLD’
In our view, DLF has the option of appealing against the CCI order in CAT and
subsequently, in the Supreme Court. As the current order does not impose any fresh
penalty, we see no incremental cash flow impact on account of the same. We believe a
broader impact of the CCI order is that future buyer‐seller agreements may be more
equitable considering interests of both parties.
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