For Emaar MGF, Is Second Time the Charm?

Real estate firm Emaar MGF Land Ltd. will once again try its luck in raising capital, but don’t hold your breath for a roaring success.

The cash-strapped company, a joint venture between an Indian developer and a Dubai firm, has been trying to raise funds for more than two years now. Even if it does actually hit the market this time, which it says it hopes to do within the next three months, it could end up raising less than its original target of 38.5 billion rupees ($869 million).

The company made its first attempt at an initial public offering in 2008. To say it didn’t go well would be an understatement. It had to refund investors’ money because of poor subscription amid the collapse of the global economy. To get extra cash last year, the company had to sell an additional 333 apartments of the 1,168-flats in its 2010 Commonwealth Games Village project to its public partner, the Delhi Development Authority land agency.

Now, a sustained rally in Indian stocks has given the company another chance.

But investors have become skeptical, having incurred heavy losses in real estate stocks. They are interested in companies’ short to medium-term growth rather than hypothetical future cash flows, says Citigroup India’s capital markets head Ravi Kapoor.

A big brand doesn’t matter as much as a company’s ability to repay its debt, and Emaar is struggling on that front. It plans to use a part of the IPO proceeds to repay its 50 billion rupees of debt outstanding as of March 31. With numerous companies from various industries in the fray to issue IPOs, investors will not exactly be jumping at the opportunity to buy a debt-ridden company. To attract investors, Emaar will have to consider pricing its shares more reasonably than it might like.

Company executives seemed confident on television recently that Emaar would be successful in its fund-raising attempts. A company spokeswoman on Friday told India Real Time that Emaar’s recent residential housing projects had been received well by consumers.

Let’s see how things turn out this time around.