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Emaar MGF IPO also falls victim to market

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BS Reporter Mumbai
Last Updated : Feb 05 2013 | 3:21 AM IST
Becomes second company in two days to scrap issue.
 
Emaar MGF Land, the Indian arm of West Asia's largest property developer, became the second casualty in as many days of waning investor interest in the primary market.
 
The company, which planned to sell 102.6 million shares in India's second-biggest IPO by a real estate company, scrapped its initial public offer (IPO) and said it will consider selling the shares when the stock markets are more stable.
 
Emaar MGF follows Wockhardt Hospitals, which withdrew its IPO yesterday after failing to attract a sufficient number of investors.
 
All recent IPOs by companies, after the mega-IPO of Reliance Power, which was subscribed 72 times, have drawn tepid response. The IPO of SVEC Construction, which was slated to close today, was extended up to February 13.
 
The price band was also revised to Rs 80-90 from the earlier band of Rs 85-95. The issue was subscribed 23 per cent times, according to data available at 6 p.m, and 900,000 bids were received against 4 million on offer. No bids were received from qualified institutional investors (QIBs).
 
Emaar MGF, which had reduced its price band twice and pushed back the closing date by five days, decided to withdraw when subscriptions fell from 83 per cent to 43 per cent of the shares offered. The company will refund the money to investors in 10 or 12 days.
 
Though the data available on the National Stock Exchange website showed that Emaar's QIB portion was subscribed 99 per cent, market sources said the subscription fell after a major West Asian fund pulled out. Forty-one per cent of the shares in the retail category were subscribed.
 
Investment bankers to the issue refused to comment.
 
"The company decided to take this step as a result of the prevailing adverse market sentiments, fuelled by renewed indications of a US recession and global meltdown,'' Emaar MGF said in a statement today.
 
The developer, a joint venture of Dubai-based Emaar Properties PJSC and MGF Development of India, is developing homes, offices, hotels and special economic zones and building the capital's Commonwealth Games village.
 
Sources close to the company said the postponement of the IPO would not hit Emaar's plans in India in the short term since it has a good capital base.
 
"Part of the IPO proceeds was to go towards retiring debt. We will not do that now. That apart, we will go ahead with all our projects," sources said.
 
A company spokesperson said the company was well-funded and had a low debt-equity ratio of 0.8 per cent.
 
"We plan to return to the primary market at an opportune time when market sentiment and liquidity are better," the spokesperson said, adding, "we also have an opportunity to explore other options till then, like private equity for further funding requirements."
 
At the original price band of Rs 610-690, Emaar was supposed to raise up to Rs 7,077 crore. At the revised price band of Rs 530-560, it would have raised up to Rs 6,462 crore.
 
Citigroup, Goldman Sachs, HSBC Holdings, JPMorgan Chase, Merrill Lynch, Enam Financial and Kotak Mahindra Capital advised the company on share sale.
 
Real estate companies raised more than Rs 16,000 crore last year on increasing demand for property.
 
Market players, who were extremely nervous, said foreign investors pulling out on mounting concerns about the US economy and the weakness in IPO markets in Asia and Europe have turned Indian investors cautious.
 
The Bombay Stock Exchange's benchmark index Sensex too has declined 13 per cent since its peak in January.
 
Issues to hit the market in February include GSS America Infotech (next week), Rural Electrification Corporation (REC)(opening on February 19), Prince Foundation and Vascon Engineers that have been graded but have not announced their price band or issue opening date.
 
According to Prime Database, this year may see 150 to 175 public issues raising about Rs 75,000 crore.

 

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First Published: Feb 09 2008 | 12:00 AM IST

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