UPDATE 1-UBS expects 'no material impact' on DLF from activist accusations

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MUMBAI, Oct 11 (Reuters) - India's biggest property developer DLF Ltd was likely to suffer no material impact from accusations by anti-corruption activists of improper dealings, and the issue had been largely priced in to the stock, UBS said.

Activists from India Against Corruption (IAC) on Friday accused DLF arranging favourable loans and real estate transactions to Robert Vadra, the son-in-law of ruling Congress party chief Sonia Gandhi.

The anti-graft group also accused DLF on Tuesday of receiving undue favours from the government in the northern state of Haryana.

DLF shares slumped 11 percent by Wednesday's close, wiping $920 million off its market value. DLF and Vadra have denied the accusations. Harayana state officials also denied the allegations in local media.

"With the stock down 11 percent on the back of this news flow, and our expectation of no material impact on DLF's business - we believe concerns are largely priced in," UBS said in a note dated on Wednesday.

UBS added the allegations against DLF would be difficult to investigate given the issues were "politically motivated" and had happened three to four years ago. The linkage of politicians with real estate developers had been a common concern in the sector, it added.

IAC activist Arvind Kejriwal, who announced both sets of allegations, is setting up an anti-corruption political party.

UBS maintained its 'buy' rating on DLF, saying the stock offered "an attractive risk-reward opportunity" given potential interest rate cuts by the central bank and possible early debt reductions following asset sales.

Goldman Sachs, however, took a more negative view on DLF's outlook, downgrading the stock to 'neutral' from 'buy'.

Goldman warned slower regulatory approvals could result in fewer project launches, while cutting its pre-sale estimates for India's largest property developer, in a note dated on Thursday. It did not discuss the IAC allegations.

DLF shares were up 1.4 percent as of 0600 GMT on Thursday, outperforming a 0.2 percent fall in the NSE index . ($1 = 53.1350 Indian rupees)

(Reporting by Rafael Nam and Abhishek Vishnoi; Editing by Richard Pullin)


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