New Delhi: The initial public offer (IPO) of Emaar MGF Land Ltd is unlikely to hit the market in early January as stock market regulator Securities and Exchange Board of India (Sebi) is yet to approve the company’s prospectus.
The company filed its draft red herring prospectus with Sebi on 27 September.
Emaar MGF is a joint venture between Dubai’s largest developer, Emaar Properties PJSC, and Delhi-based developer MGF Development Ltd. The company is proposing to make a public issue of 117 million equity shares to raise Rs6,000 crore, ranking it among the biggest share sales in the country.
Awaiting nod: Emaar building in Connaught Place, Delhi. (Photo: Harikrishna Katragadda/Mint)
According to earlier media reports, Mohamed A. Alabbar, chairman of Emaar Properties, had said he expected the IPO to happen in early January.
Sebi has sought clarifications on the draft red herring prospectus, something it routinely does when it wants more details from firms that file for a share sale. Emaar MGF has said it has replied to the queries raised and is awaiting the regulator’s approval.
“In the last one month or so, we have been responding to Sebi’s queries,” said Sanjay Baweja, chief financial officer, Emaar MGF. “As soon as we get the approval, we will plan the IPO. We expect the IPO to hit the market in the first quarter of this year,” he added.
Baweja declined to provide further details on the questions raised or give a more definitive time frame.
While Sebi is supposed to clear public issues within 21 days of filing the draft prospectus, it takes around 40-45 days to clear most issues. “In large public offerings, Sebi comes up with queries asking companies to make disclosures regarding possible risks to investors,” said Joby Mathew, a Mumbai-based independent securities lawyer. “In the course of doing that, Sebi would have asked the merchant bankers of the company for certain clarifications. Once Sebi is satisfied with the replies, the prospectus will be cleared,” he added.
Sebi declined to provide details on Emaar MGF’s IPO as it does not comment on individual IPOs. Typically, once Sebi is done, a company takes up to a month to approach the investors with its offer.
January will see at least two big-ticket IPOs, including India’s largest ever initial share offer—that of Reliance Power Ltd, which is looking to raise more than Rs11,000 crore from the sale. The Reliance Power IPO opens on January 15.
The Kishore Biyani-led Future Capital Holdings is also coming out with an initial public offer to raise Rs490 crore. The company has fixed a price band of Rs700-765 per share for its offer which is also expected to hit the market in the middle of Janaury. State-owned firms such as Oil India Ltd, National Hydroelectric Power Corp. Ltd and Rural Electrification Corp. Ltd are also expected to tap the capital market in early 2008.
Given all the activity in the market, analysts say that the timing of Emaar MGF’s offer will decide the fate of the offer. “It (timing) would have a bearing on the liquidity in the market as there is a lot of money, almost Rs20,000 crore chasing the IPOs of Reliance Power and Future Capital Holdings,” said an analyst with a leading stock brokerage who asked not to be identified as he is not authorised to speak to the media.
“I think the offer will get delayed because Sebi has put many questions to them (Emaar MGF). I don’t expect the offer to come out in January,” said another analyst with a global financial research group who too did not wish to be identified. Both analysts claim to be aware of the nature of Sebi’s queries but declined to provide details of the same.
Emaar MGF’s IPO comes less than a year after DLF Ltd and half a dozen other developers such as Omaxe Ltd raised more than $3 billion from the capital markets. According to investment bankers familiar with the issue, Emaar MGF could raise Rs4,000-6,000 crore from the share sale. That would make it the second largest real estate offering after that of DLF Ltd, which mopped up Rs9,000 crore last year.
According to the draft red herring prospectus filed by Emaar MGF, it plans to use Rs4,698 crore of the proceeds to partly fund acquisition of land and land development rights, development and construction costs for its “Palm Drive” project in Gurgaon, Haryana, and to repay loans.
“The earlier Emaar MGF hits the capital market, the better, it is for them,” said an analyst with a global financial services provider who did not wish to be identified.
Last year, Bangalore-based Purvankara Projects Ltd, came out with an IPO in August, a month after DLF’s share sale, and received poor response forcing it to extend its subscription period and reduce its price band.
Not all analaysts and investors, however, have concerns that the Emaar MGF may have trouble getting investor money. “Emaar MGF will get a lot of interest from foreign institutional invetsors,” the analyst with the stock brokerage said. “They (Emaar MGF) will have money power as the Dubai government has a majority stake (in Emmar Properties).”