Promoters of Emaar MGF (Dubai’s Emaar Holding and Shravan Gupta of MGF) have virtually sold shares cumulating to about 1.5% of the equity to existing institutional shareholders including Evolvence and New York Life Investment Management-Jacob Ballas virtually free, ahead of

its proposed public float. The real estate company that had made unsuccessful attempts to go public in the past (starting with early 2008 thereby becoming one of the first casualties of the stock market crash) is looking to raise Rs 1,600 crore through the issue that is being managed by as many as seven merchant bankers.

Emaar Holdings sold 9.8 million shares to Evolvence’s EIF-Coinvest IV for $2,000 or just Rs 90,260 that has more than doubled the private equity firm’s stake in Emaar MGF to 2.1%, making it the single largest non-promoter group investor in the firm. EIF Coinvest IV had earlier

invested Rs 183 crore to pick 9.4 million shares (after accounting for bonus) in November 2006.

Emaar Holdings has also sold 5.3 million shares to New York Life Investment Management (NYLIM) for just $1,000 or Rs 45,130. In addition, Shravan Gupta sold 0.12 million shares to Jacob Ballas Capital for Rs 1,000. NYLIM-Jacob Ballas combine had earlier put in Rs 92 crore ($20 million) between November’06-March’07 to pick around 3.4 million shares. This takes their joint holding to about 0.96%.

These state sale by the promoters comes after buybacks from few other institutional investors such as Citigroup Venture Capital and IFCI. While Emaar bought back shares worth Rs 33 crore allotted to IFCI in January 2008 at par in February 2009, it apparently provided a markup to private equity firm CVC.

CVC had invested Rs 228 crore in November 2006 that was bought over by Emaar in August this year for around Rs 277 crore.

Emaar MGF that also has the backing of media firms Bennett Coleman & Co Ltd (BCCL) and NDTV-- apparently through ad-for-equity deals (BCCL’s investment value is pegged at Rs 25 crore while NDTV’s Rs 16 crore both investing in January-October’08), has significantly cut

back its issue size in its third attempt to go public. The company was originally eyeing to raise Rs 7,000 crore by floating 10% stake in early 2008, at the height of the bull run.

It cut its expectations and in the draft filed last year in September, its issue size was revised to around Rs 3,900 crore and has now more than halved fund raising plan to just Rs 1,600 crore. It has been speculated that the company has pruned fund raising plans due to lower fund requirement as it has been able to cut its debt.

The company intends to use almost Rs 1,250 crore of the issue proceeds for repayment and prepayment of certain loans (Rs 614 crore) and payment towards the redemption of certain redeemable preference shares (Rs 627 crore) and the remaining partly for payment towards development charges.

The promoter group holding in Emaar MGF is pegged at 94.9%, Assuming they are looking to bring it down to 74.9% in line with new minimum public holding norms, the firm could be eyeing a valuation of just around Rs 7,600 crore.

However, if the promoters intend to bring their holding down to just 90% for now, then they are looking at a valuation of Rs 30,800 crore ($ 6.8 billion). A 10% equity dilution which is the most likely case, would mean the company asking for a valuation of around Rs 16,000 crore ($3.5 billion), a far cry from what it expected just two and half years ago.

At this valuation, while Evolvence and NYLIM-Jacob Ballas will be sitting on about 60-65% returns on their four year old investment, NDTV and BCCL will be sitting on unbooked losses of almost two thirds of their investment value.

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