Raj

Real estate developer Emaar MGF Land Ltd, which is planning an initial public offering (IPO), will face a shortage of funds of about $1 billion (around Rs3,900 crore) even after the proposed public issue that could mop up as much as Rs6,000 crore, said a person familiar with the matter.

The firm “will need around $1 billion over the next two-and-a-half years to fund projects”, the person said. Emaar MGF plans to set up special purpose vehicles for its development projects and allow investors to pick up a stake in these projects to meet its funding needs, the person said. He did not wish to be identified because the company has filed for an IPO.

The Emaar MGF office in New Delhi. The company is looking to plug funding gaps through a mix of debt and private equity investmentThe firm is looking to plug the funding through a mix of debt and private equity investment in various projects. Emaar MGF is also looking at raising capital by listing some of its properties as real estate investment trusts (Reits) in the US or Singapore.

Emaar MGF is a joint venture of Dubai-based property developer Emaar Properties PJSC and India’s MGF Development Ltd. The firm plans to invest $12 billion over the next four to five years in information technology (IT) parks, special economic zones, residential, commercial, retail and hospitality projects countrywide. Most of these projects will take off in the next 24-30 months.

Emaar MGF recently filed its draft red herring prospectus with the Securities and Exchange Board of India for its IPO of 117 million shares. According to investment bankers close to the issue, Emaar MGF could raise Rs4,000-6,000 crore from the issue. That would make it the second largest real estate offering after that of DLF Ltd, which mopped up about Rs9,000 crore this year.

Emaar MGF is also looking at listing some of its properties as Reits over the next 24-36 months and “could list some of the properties such as IT parks, malls or hotel properties as Reits in the US or Singapore”, the person said. Emaar MGF also plans to borrow from the domestic market, according to this person.

“Looking at the future plans of the company and its overall business needs, whatever is in the best interest of the company in terms of value maximiztion and industry best practices will be followed,” a company spokesperson said.