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Emaar’s India unit in IPO to tap US$1.8b

Proceeds will be used to buy land, development rights, pay for construction

(MUMBAI) Dubai’s Emaar Properties hopes to raise up to US$1.8 billion from an initial public offering of a unit in India, where IPOs are forecast to more than double this year despite choppy markets in the wake of the US subprime mortgage crisis.

Property development in India has flourished and land prices have jumped since the country eased rules on foreign investment in the construction industry in early 2005.

Emaar MGF Land said in a statement yesterday it plans to sell 102.6 million shares at between 610 and 690 rupees (S$22.30- $25.20) each in the Feb 1-6 IPO, looking to raise slightly more than had previously been expected.

Emaar MGF, which has access to 13,024 acres in India, will use the IPO proceeds to acquire land and development rights, pay for development and construction and repay loans.

‘There is clearly an investor appetite for real estate firms, if the premiums commanded by firms like DLF are anything to go by,’ said Pranay Vakil, chairman of consultancy Knight Frank.

DLF Ltd, India’s most valuable real estate firm, raised US$2.25 billion in an IPO last year. Its shares have risen more than 70 per cent since their July debut.

But, after a five-year, record-breaking bull run, India’s main stock index has dropped 16.5 per cent from a life high just 11 days ago. DLF fell 7 per cent yesterday, in line with the benchmark index, which hit its lowest since late-September.

Shares slumped yesterday, hit by brokers’ margin calls, global fears of a slowdown and selling by foreign investors.

Yet Shyam Bhat, who manages about US$500 million of assets for Principal Pnb Asset Management, said recently that construction firms stand to gain from rising infrastructure spending and expected softer interest rates.

Despite a global credit crunch triggered by the US sub-prime crisis, investors are eager to move money into property firms in China and India, whose economies are growing rapidly.

Three big Chinese property firms plan to hit the Hong Kong market this year to raise a combined US$4 billion, while DLF and Unitech Corporate Parks are in talks to float Real Estate Investment Trusts (Reits) in Singapore.

India’s market regulator has issued draft guidelines for Reits, which some analysts expect may be allowed shortly.

‘India looks set to formulate rules for allowing Reits, which will have an edge, and these firms are possibly keen to tap the market ahead of that to gain some scale,’ said Knight Frank’s Vakil.

Emaar MGF’s IPO follows last week’s blockbuster US$3 billion Reliance Power IPO, which was lapped up by investors in a minute.

Companies in India are expected to raise up to US$15.8 billion from new listings this year, almost twice as much as last year’s record US$8.3 billion, according to Thomson Financial data.

Emaar MGF is being advised by Enam Securities Pvt Ltd and DSP Merrill Lynch Ltd, which are the global coordinators.

Citigroup Global Markets India, Kotak Mahindra Capital, HSBC Securities and Capital Markets (India), JPMorgan India , Goldman Sachs (India) Securities and ICICI Securities are also advisers to the issue.

 

Source: Reuters

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