Emaar may take full control of India joint venture

Emaar MGF needs to repay AED1.3b in loans but IPO reception is muted

Emaar MGF was fined $20m for the delayed handover of the Commonwealth Games Village last year. Photo: Getty
Emaar MGF was fined $20m for the delayed handover of the Commonwealth Games Village last year. Photo: Getty

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Emaar MGF, the joint venture between the Dubai real estate conglomerate and MGF Development, could come under Emaar’s full control if it fails to pay back AED1.3bn ($353.9m) in loans, analysts have said.

New Delhi-based Emaar MGF planned to raise $2.4b through an initial public offering to repay the loans, but appetite for the listing is muted, said Egypt’s HC Brokerage in a research note.

“Since the IPO is unlikely to go through soon, we believe that MGF will continue to be a drag on Emaar’s cash flows. Even at the latest reported implied IPO valuation of $2.4b [at a 30% premium to Emaar’s investment] appetite appears anaemic,” analysts said.

“Should the loans not be repaid, Emaar gains the right to increase its shareholding in MGF, which may bring it above 51% and result in full consolidation.”

In December 2010, Emaar MGF was fined $20m by a Delhi high court for the delayed handover of $230m Commonwealth Games Village.

The Delhi Development Authority, the state body overseeing the games, said that the 63.5 hectare village had numerous construction flaws and ran over deadline.

Analysts maintained a cautious view on Emaar Properties, which is forecast to cut its unit deliveries to the Dubai market by 44% in 2011 compared to the year earlier period, as a glut of new real estate comes online.

“We estimate a 41% year-on-year decline in revenue,” analysts said. “Dubai deliveries are winding down with construction significantly delayed.”
 

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