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, 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.”