Seemingly unfazed by the withdrawal of its Initial Public Offering (IPO) in February this year, Emaar MGF — a joint venture between Dubai’s Emaar Properties PJSC, and India’s MGF Developments — is moving full steam ahead with its projects spanning residential, hospitality, retail, commercial and special economic zones (SEZs) and IT parks across India.

Emaar Properties plans to infuse $150 million into specific projects of the Indian JV, but the business environment in the Indian real-estate market is challenging, with rising input costs and high interest rates threatening to cast a shadow over consumer demand.

Business Line caught up with Mr William R Rattazzi, CEO of Emaar MGF Land to discuss the company’s funding plans, outlook and the strategy to counter the market sluggishness.

Excerpts from the interview:

Emaar MGF pulled back its Rs 6,500 crore public issue amid market turmoil earlier this year. That must have been a tough call…

We decided and took the call of not going ahead with the IPO when we were already 84-85 per cent subscribed. We did not believe that the valuation of the company was being properly reflected due to the overall market meltdown. And we felt that for the shareholders to get a 45-50 per cent decline in values in a space of one quarter will be a challenge to deal with. It was certainly a tough call.

But I feel that this pause (in going ahead with the IPO) is going to be meaningful for us. We think the valuation accorded to us as a function of our execution capacity will get higher with time. Being a three-year-old company we have had that many years of good solid launches, revenue and execution. When we come back to the market, we hope to get a higher valuation on the execution side.

How is Emaar MGF planning to fund its expansion?

We are in the process of doing SPV-related financing. It will be a combination of specific ones relating to a particular project and/or some SPVs (special purpose vehicles) put together in a tranche or basket. An investor for many reasons may want to have bit of commercial, retail, cineplex, residential, greenfield and redevelopment exposure, as each of them has a separate risk profile and returns.

In addition, we continue to achieve cash flows in our existing projects. Our Boulder Hills project is doing very well, and so is Mohali Hills. Interestingly, for us the Punjab region has excelled over other regions in terms of customer response.

Meanwhile, Emaar’s commitment to Emaar MGF is growing both from personnel and financial investment standpoints. In addition, we are open to a PE fund coming in at the corporate level, and we are looking at that right now.

Rising interest rate is dealing a severe blow to the buying sentiments, and at the same time choking developers’ access to capital. What strategy is Emaar MGF adopting to tide over the issue?

Well, for small developers it is bad news, because access to capital is limited, and the player then ends up counting much more on revenue streams out of projects for pre-sales. This could mean huge discounts to margins in order to sell wherever you can or, alternately, curtailing many of the projects.

For majority of developers in India this is a big issue. However, for larger developers it is just another challenge to add to the play. It is not an overwhelming challenge at present. We try to tie up with banks to provide reasonable sources of mortgage financing. We also try to ensure that we do not get over-leveraged ourselves in any way.

Anytime you make it more expensive to buy something but correspondingly do not change the ability of consumers to buy it by increasing their net disposable income, you will make them pause before buying, be it real estate or cars. So I think the current situation will result in some slowdown in pockets, and in some segments of the market more than others.

What are your plans for the South. What locations are you targeting?

We are committed to enlarging our business in the South. We are currently in Chennai, and also in Hyderabad — in a big way in Boulder Hills.

We also have projects in Kochi and Goa that we are close to moving forward with. We have a good mix of residential, commercial, hospitality and retail projects, and in some cases these include mixed use developments. Emaar MGF plans to develop over 31 million square feet across ten locations in South India with a planned investment of $3 billion.

Responses to blproperty@thehindu.co.in

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