New Delhi: Emaar MGF Land Ltd, a joint venture company of Dubai’s largest real estate developer, and Delhi-based MGF Development Ltd, may raise between Rs4,000 crore and Rs6,000 crore through a proposed initial public offer (IPO), according to banking sources close to the matter. That would make it the second largest offer for realty in the country after that of DLF Ltd, which mopped up more than Rs9,000 crore. According to the draft red herring prospectus filed by Emaar MGF with the Securities and Exchange Board of India, the firm plans to use about 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 the Delhi suburb of Gurgaon and to repay loans.

Market-bound: Emaar MGF’s New Delhi office. It is proposing an issue of 117 million equity shares. The price band has not been announced

Emaar Properties PJSC owns 41-42% of the company, while the rest is held by MGF. After the public issue, the promoters and related parties will hold approximately 85.7% of the outstanding equity shares according to the draft document. Emaar MGF is proposing a public issue of 117 million equity shares. No price band has been officially announced.

“Emaar MGF seems to have a very good reputation," said Nitin A. Khandkar, senior vice-president, research, Keynote Capitals Ltd. “It is too early to comment on their IPO but the company will benefit from the fact that Emaar is the largest developer in the Middle East."

Emaar MGF has land reserves of 12,544 acres, as of 31 August, with an estimated saleable area of 542 million sq. ft. Over 70% of the land reserves are fully paid for, of which, more than 397 acres are under development.

The draft prospectus says around 83% of the company’s land reserves include land for which the company or its joint development partners have not yet obtained a certificate for change of land use from agricultural use. For the year ended 31 March, the company’s total revenue was Rs16.87 crore and it lost Rs46.60 crore.

According to the prospectus, because of Emaar MGF’s short operating history, it does not have any completed projects. The firm started operations in 2005 and has incurred operating losses since then. Emaar MGF has incurred operating losses in the first two fiscal years of operation. However, Emaar’s revenue for three months ended 30 June was Rs193.17 crore with a net profit of Rs49.94 crore during that period. The company expects limited revenue in the immediate future and the operating losses might continue in the short term, warns the document.