MUMBAI // Emaar's Indian subsidiary, Emaar MGF, will appoint investment banks to manage its planned US$800 million (Dh 2.94 billion) initial public offering on India's stock exchanges next month, The National has learned. Emaar was forced to withdraw plans to raise almost $2bn early last year, when India's stock market collapsed, leaving the Indian subsidiary reliant on its parent company in Dubai to fund its projects.
Emaar MGF's return to the market has been made possible by the surge in investor appetite for Indian stocks after the recovery of markets worldwide and with the stable government India voted into power in early May. Emaar MGF's management has already selected the Indian bank Kotak Mahindra to lead the issue, and is set to appoint up to four more banks within a fortnight, according to a source at one of the banks. It plans to launch the issue in early September.
"We've been meeting them regularly," the banker said. "They're looking for four banks. Kotak Mahindra is definitely there. Once they appoint the managers, only then will they give more clarity." The financial institutions on Emaar's informal shortlist include DSP Merrill Lynch, Deutsche Bank, JP Morgan, and the Indian investment bank Enam Securities, the banker said. Emaar is expected to sell a stake of between 10 and 15 per cent, but has yet to discuss this in detail with bankers. Last month, it confirmed that it was still considering an IPO for its Indian subsidiary.
"Based on regulatory approvals and dependent on market opportunities, Emaar MGF continues to evaluate various fund-raising options including an IPO," the company said in a statement on the Dubai Financial Market website. A source at Kotak Mahindra, which is advising Emaar MGF on the issue, said the company was aiming to hit the market by the beginning of October. Within a fortnight, another lead bank would be appointed at Kotak's level, along with two further banks at a junior level, the source said.
It would then take four to six weeks to prepare the initial paperwork, known as a red herring document, and file it with India's stock market regulator, SEBI, and a further month to receive the necessary regulatory approvals. "This entire process takes time," the source said. "Having previously prepared a red herring document tends to cut the work by about 50 per cent, but there's still work to be done. This will definitely be a big IPO. There aren't that many $1bn-plus real estate companies out there. So there will be strong interest in this deal."
The IPO of Adani Power last week was 18 times oversubscribed, with investors putting in bids totalling 490bn rupees (Dh37.63bn) for shares worth 27bn rupees. Debasish Purohit, the managing director of Indian equity capital markets for DSP Merrill Lynch, said: "This is reopening the IPO market in India - liquidity and appetite is back in a big way." As well as Emaar MGF, other Indian property companies such as Sahara Prime City, Godrej Properties, Lodha Developers, HDIL, Nitesh Estates, Parsvnath and Sriram Properties are also expected to tap the stock market this year.
Indian property companies were hit by a liquidity crisis last year, as consumer and office demand fell sharply at the same time as banks pulled back on lending. Srinivasan Subramanian, the head of equity capital markets at Enam Securities, said many Indian property companies had recently strengthened their balance sheets by privately placing shares with institutional investors through "qualified institutional placements", or QIPs.
"These QIPs have not only given them a lifeline, they've improved their credit ratings, so we believe they may be able to come to public market," he said. "A few of them are preparing red herring documents, which have not yet been made public. As soon as we see some clearance from the regulators, we should be able to take them to the market." Emaar launched its subsidiary with the Indian developer MGF in December 2005. In 2007, it announced plans to invest $12bn in an ambitious series of projects.