Emaar MGF to use over half of Rs 3,850-cr IPO to repay debt

Delhi-based real estate company Emaar MGF plans to utilise over half of the amount it will raise through its initial public offer to repay part of its debt.

In its draft red herring prospectus filed with the market regulator Sebi, the company said it would deleverage its balance sheet by paying Rs 1,972 crore from the issue proceeds. The company plans to raise Rs 3,850 crore through its IPO.

Emaar MGF, a joint venture between Dubai-based Emaar Properties and domestic firm MGF, had a debt of Rs 5,807.79 crore as on August 31. In the last financial year, the company’s total income was Rs 960.50 crore with a net loss of Rs 72 crore.

The repayment will also include the debt of the special purpose vehicle (SPV) created by the company for developing the Commonwealth Games Villages — Emaar MGF Construction.

Some of the lenders to the company include Unit Trust of India Mutual, HDFC, L&T Infrastructure Finance Company, Axis Bank, LIC, Citibank, ABN Amro Bank, HSBC and SBI.

The company said its predominant concern at this point was to service its debt and a substantial part of its cash flow would go to service the interest cost. The company had a positive cash flow of Rs 174.6 crore from its operations and a negative cash flow of Rs 30 crore from investment activities in FY2009.

Emaar has restructured the Rs 2,000-crore rupee-denominated debt by extending the duration of repayments and is also in discussions with some lenders for reducing the interests rates on certain loans.

The realty firm would also pump in Rs 820 crore for redemption of certain redeemable preference shares. It would also invest Rs 276.8 crore in paying development and licence renewal charges. The remaining part of the proceeds is proposed for general corporate purposes, including acquisition and brand building exercise.

Emaar MGF had filed its DRHP for the second time with Sebi to raise up to Rs 3,850 crore, much lower than what it had planned to mop up last year.

In February last year, the company had planned to raise Rs 7,000 crore through its IPO, but withdrew it due to poor market response.

Emaar MGF has a land bank of 11,340 acres and 29 projects, comprising a saleable area of 26.3 million square feet, under various stages of development.