April 9 (Bloomberg) -- Emaar MGF Land Ltd. revived plans to sell shares in India for the first time, leading 182 billion rupees ($4 billion) of property offers at a time rising interest rates are deterring homebuyers.
Emaar MGF, the Indian joint venture of the United Arab Emirates’ biggest developer, intends to sell stock in the next three months, Shravan Gupta, executive vice chairman said yesterday. The New Delhi-based developer secured approval to sell as much as 38.5 billion rupees of shares, two years after scrapping a planned 64.64 billion rupee offer as stock markets slumped.
The sale will compete with Lodha Developers Ltd., Sahara Prime City Ltd. and Nitesh Estates Ltd., which are attempting the second-highest fund raising by property companies. The Bombay Stock Exchange Realty Index has fallen for the past two quarters, while the benchmark Sensex just completed its longest stretch of quarterly gains since the third quarter of 1994.
“Investors are negative on property stocks as reflected in the decline of the BSE Realty Index this year,” said Anubhav Gupta, an analyst with Kim Eng Securities India Pvt. in Mumbai. Emaar MGF “may not be able to earn in the next two to three years what they got in 2008 as both the volume and prices are much lower.”
Rising Rates
Goldman Sachs Group Inc. forecasts India will increase policy rates by a total of 1.5 percentage points this year. Reserve Bank of India Governor Duvvuri Subbarao said March 23 India risks a “hard landing” if inflation isn’t reined in. Subbarao’s comments signaled the central bank may follow the first increase in interest rates in almost two years on March 19 with more measures to rein in inflation from a 16-month high.
The planned $4 billion of share sales by real estate companies will be second only to the $4.3 billion raised in 2007, according to Bloomberg. Godrej Properties Ltd. ended a two-year drought in initial public offers by property firms in India with a 4.69 billion rupee sale in December. Rival DB Realty Ltd. followed in February with a 15 billion rupee first-time share sale.
Real estate IPOs will also compete with state-owned companies for investor interest. India plans to raise $8.9 billion selling shares in companies it owns in the fiscal year through March 2011 -- more than half the total value of last year’s offerings in India.
Emaar MGF plans to use the proceeds from the IPO to pay loans and fund development, according to a Sept. 29 share sale document filed with the regulator. Kotak Mahindra Capital Co., ICICI Securities Ltd., Deutsche Bank AG, Credit Suisse Group AG, UBS AG, HSBC Holdings Plc and the Royal Bank of Scotland Group Plc were hired to manage the offering, it said at that time.
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