Emaar seeks valuation of India assets

Emaar seeks valuation of India assets

Bangalore: Emaar Properties PJSC, Dubai’s largest real estate firm, has asked consultants and investment bankers to value Indian joint venture (JV) Emaar MGF Land Ltd’s land bank and other assets in the country.

The move may be preparatory to the builder of Dubai’s Burj Khalifa, the world’s tallest tower, exiting the bulk of its portfolio in India, two people familiar with the development said.

Emaar Properties is reviewing its assets in India and is in talks with investment bankers, said a third person directly involved with the negotiations. “We are having discussions with them," said this person, adding that no final decision had been taken.

The firm and its local partner said such valuation exercises were routine and that there was no move to break up the assets.

“Emaar MGF, on a regular basis, values its assets for banking or allied purposes. Emaar Properties, as an investor, also gets similar valuations done across its investments and business, in various geographic markets, including India," Emaar MGF said in a joint email response. “There is no move to split the asset portfolio of Emaar MGF."

Alongside an enterprise valuation that entails taking stock of Emaar MGF’s inventory, ongoing projects and land bank, separate mandates or assignments have been given to property consultants for sale prospects of various components. Emaar MGF’s asset portfolio is estimated to be at least 5,000 crore by property consultants.

Emaar Properties has a 43.86% stake in New Delhi-based Emaar MGF, a JV formed in 2005 with the Guptas of MGF Developments Ltd, who own the remaining stake. Shravan Gupta is the executive vice-chairman and managing director of Emaar MGF.

The Dubai company has appointed Standard Chartered Bank in India to put an estimate to the value of its holdings in the JV and oversee the entire process, which may take three-six months to conclude, said the first two people mentioned earlier. A Standard Chartered Bank spokeswoman declined to comment.

“Once the valuation is done, they (Emaar Properties) will discuss and identify potential buyers with their investment banking team," said one of the persons familiar with the development cited above, adding that the Dubai company is looking to eventually exit from India. “Options include selling to the joint venture partner, who has the first right of refusal, or sell to a third person."

Emaar MGF has 11,340 acres of land and 44 (residential, commercial and hospitality) projects in over 20 cities. Emaar Properties has total assets of $17 billion (Rs 76,000 crore), of which international assets are valued at $6.12 billion.

In 2010, Emaar Properties posted a net operating profit of $826 million, 31% higher than the corresponding figure of $633 million in 2009, according to a release. Its retail and hospitality subsidiaries contributed significantly to the revenue.

In India, however, Emaar has put its multi-crore hospitality and retail plans on the back-burner, focusing more on residential projects.

Emaar MGF has been exiting some of its hospitality projects and partnerships. It recently sold a seven-acre property in Kolkata, where it had planned to develop a Marriott hotel, for 250 crore to a consortium of developers, including Kolkata-based Mani Group and Bangalore-based Sattva Group.

The latter is now pursuing the hospitality project, said a person involved in the process.

Sattva Group chairman and managing director Bijay Agarwal confirmed the deal, but didn’t comment on the price.

“As part of its financial and business strategy, the company raises funds from various sources, including monetizing assets held for a longer term," Emaar MGF said in a statement. “The Kolkata hospitality project was part of such an initiative. The company continues to look at such opportunities from time to time."

Last year, UK budget lodging chain Whitbread Plc bought the 50.1% stake held by Emaar MGF in their JV. Whitbread is now developing hotels under the Premier Inn brand in India on its own.

Emaar MGF is also in talks with a few private equity funds to raise money for projects through a special purpose vehicle. The move comes after three aborted attempts by the firm to raise money from the equity market. It filed a draft red herring prospectus (DRHP) for the fourth time on 4 October, slashing the amount sought to be raised to 1,600 crore from a 7,000 crore target in 2008. The money will be used to repay loans, pay development charges and redeem preference shares. Debt as of 28 February stood at 4,674 crore.

“Emaar MGF has refiled its DRHP with Sebi (Securities and Exchange Board of India), and we are awaiting clearances from the regulator," the firm said.

“While the real estate market has stabilized since 2010 and prices are also not rising any more, the capital markets remain a good option. The question is when and how," said Ajit Krishnan, leader (real estate practice), Ernst and Young. “The credentials of the developer and its execution record would determine" the share sale’s success.

Emaar MGF was criticized for the construction of the 2010 Commonwealth Games village in Delhi for which it also got a 700 crore bailout package from the Delhi Development Authority. The company rejected accusations against the village.

“The controversies, as have been reported in the past, dwelled on various extraneous issues and multiplicity of agencies simultaneously involved at the Games facilities," Emaar MGF said.