Gupta brothers of MGF Group split

Gupta brothers of MGF Group split

Mumbai: The Gupta brothers, who own and run Delhi-based MGF Group, have effected a split in their business, according to two people familiar with the development.

There had been differences between Shravan Gupta and his younger brother Siddharth Gupta for some time, but “there has been a family settlement where the differences have been amicably sorted out, and a legal document has been signed", said one of the two persons with direct knowledge of the development, who spoke on condition of anonymity.

According to this person, Delhi-based boutique law firm Mine and Young handled the legal aspects of the settlement. Calls made to Amitabh Chaturvedi, managing partner of the firm, remained unanswered.

The first person added that Shravan Gupta, the face of Emaar MGF Land Ltd, the group’s flagship in which Dubai’s Emaar Properties PJSC has a 43.86% stake, will continue to head this firm while the assets of MGF Developments Ltd will be divided between the two brothers. MGF Developments focuses mainly on developing commercial properties, and also finances car buyers and car dealers. Emaar MGF’s major focus is the development of residential properties. It has also developed the athletes village for the Commonwealth Games, scheduled to be held in the Capital in October.

“At Emaar MGF, our key focus is to create a premier organization in the real estate development space, and to evolve strategies to support expansion and growth by providing quality products to our customers and create value for all stakeholders. Therefore, any restructuring is to manage growth and harness new growth opportunities," Adfactors PR Pvt. Ltd, the public relations agency for Emaar MGF, said in an email response to Mint.

“Shravan Gupta, executive vice-chairman and managing director, Emaar MGF, will continue to oversee the real estate business of the group, while Siddharth Gupta will be managing the automobile distribution business of the group," the agency’s response added.

The first person, who has direct knowledge of the development, said that the division would help both brothers grow their business.

It is also not expected to hamper Emaar MGF’s long-standing plans to sell shares to the public.

Since the incorporation of Emaar MGF in 2005, MGF Developments has not undertaken any large projects.

According to the draft red herring prospectus (DRHP) of Emaar MGF, filed with the Securities and Exchange Board of India in September 2009, Shravan Gupta, 36, owns 17.66% of the company, while his brother Siddharth Gupta, 33, owns 7.54%.

Mint could not ascertain whether Siddharth Gupta would sell his stake to his brother.

Emaar MGF had aborted its initial public offering (IPO) in February 2008 in turbulent market conditions. It moved the capital market regulator again in September 2009 with its IPO plan and received Sebi approval in February.

On 2 August, Bloomberg had reported that Emaar MGF could cut the size of its share sale to around $433 million (around 2,030 crore today). In 2008, it had planned to raise 7,000 crore from the share sale.

According to the person cited in the first instance, the first signs of tension between the brothers appeared in the second half of 2007 when Emaar MGF was preparing the first DRHP and the shareholdings of all directors and promoters were to be defined in accordance with Sebi norms.

According to DRHP, the promoters of Emaar MGF are Emaar Properties, Shravan Gupta, Emaar Holding II and MGF Developments.

Emaar MGF has a land bank of 11,340 acres and 29 projects with an estimated saleable area of 335 million sq. ft of residential properties, 75 million sq. ft of commercial properties and 4 million sq. ft of retail properties, according to the September 2009 DRHP.

MGF Developments finances dealers of Hyundai Motor India Ltd, India’s largest car exporter, and Toyota Kirloskar Motor Pvt. Ltd.

Last month, Citigroup Venture Capital International (CVCI), the private equity (PE) arm of Citigroup Inc., exited from Emaar MGF by selling its 1% stake back to the promoters.

The PE firm and the promoters had a put option whereby the latter would buy back CVCI’s stake by 30 June 2010, if it had not floated an IPO by then. CVCI had acquired the stake for about $51 million in 2006.

PE firms enter into such pacts with promoters as a window to exit after a certain period if the secondary sale or a public offer does not materialize.

Real estate developers won’t find it easy to sell shares to the public, said an expert.

“Though the IPO market is showing signs of recovery, investors will still be cautious of real estate," said Amit Mookim, director (transaction advisory real estate) at audit and consulting firm KPMG India Pvt. Ltd.

The success of IPOs of real estate developers, according to him, will be linked to their reputation, the projects they launch and the feasibility of these projects.