New Delhi: The venture capital arm of Citigroup Inc, Citi Venture Capital International sold 40% of its holding in Emaar MGF Land Ltd, a real estate developer that is selling shares to the public next week, after nearly quadrupling the value of its effective investment in little over a year.
Citi originally held 11.69 million shares, and the 4.7 million shares it sold have been valued at Rs325 crore by DE Shaw, a global investment firm, which is buying the stock according to the red herring prospectus filed by Emaar MGF. The valuation for the stake sale is based on the upper end of the price band fixed by Emaar—priced between Rs610 and Rs 690 a share. DE Shaw’s India representative could not be reached for comment.
Cashing in: Emaar chairman Mohammad Ali Alabbar (R) speaks with Shravan Gupta, executive vice chairman of Emaar MGF, during a news conference in Mumbai on Monday.
“You can call it a hedging strategy,” said Ajay Relan, managing partner (regional head-India) of Citi Venture. “When we invested, the company was valued at $4 billion, now it is being valued at $16 billion. We want to take part of the gain and ride with the rest,” he said, explaining the rationale behind selling some shares while holding on to the majority. Citi Venture picked up 1.46 million shares in Emaar MGF for Rs1,558 per share in November 2006. Emaar MGF issued bonus shares in the ratio of seven shares for each share held on September 22, 2007— four days before the company filed its IPO (initial public offering) papers with the Securities and Exchange Board of India (Sebi). With this, the effective cost for Citi Venture works out to Rs195 per share.
However, the unsold portion of its stake in Emaar will have to be locked in for at least an year as part of the IPO rules, Relan said. Citi Venture’s move comes in the backdrop of its parent posting its biggest loss ever after home loans it bought soured in the US market leading to write-downs of a whopping $18 billion. Citi has since had sovereign wealth funds and private investors pump in money to rescue it.
In a separate transaction, two of India’s leading media houses, New Delhi Television Ltd (NDTV) and Bennett, Coleman and Co. Ltd (BCCL) picked up minority stake in a pre-IPO placement for Rs25 crore each. IFCI Ltd, the Delhi-based financial institution, also participated in the pre-IPO placement and paid Rs50 crore. The stakes picked up by the media firms account for a fraction less than 1% of shareholding in Emaar MGF. Both NDTV and BCCL declined comment.
HT Media, the publisher of Mint, Hindustan Times, and Hindustan, competes with BCCL, which publishes general, business and local-language dailies.