Emaar & MGF to Part Ways, Split JV Ver­ti­cally into Two

Cos may take a call on the share­hold­ing pat­tern af­ter court ap­proval for the scheme of de­merger

The Economic Times - - Companies - Arun.Ku­mar17 @times­group.com

New Delhi: Dubai-based Emaar Prop­er­ties PJSC, which had made one of the largest FDI of over .₹ 7,000 crore in its real es­tate joint ven­ture Emaar MGF Land, has de­cided to part ways with its In­dian part­ner MGF Devel­op­ment.

The joint ven­ture will now be ver­ti­cally split into two with one part man­aged by Emaar and the other by MGF, a per­son fa­mil­iar with the devel­op­ment said. The al­lo­ca­tion of var­i­ous projects of the JV in each of the ver­ti­cals will be based on the un­der­stand­ing reached be­tween the two par­ties, the per­son said.

“Un­der the said agree­ment, two new en­ti­ties will be formed with­out chang­ing the share­hold­ing pat­tern. Once the scheme of de­merger is ap­proved by court then both part­ners will de­cide on the modal­ity of pro­posed change in the share­hold­ing pat­tern of the new en­ti­ties,” said a sec­ond per­son close to the devel­op­ment. “Each of the part­ners may buy out the other in their re­spec­tive en­ti­ties or swap their own­er­ship or di­lute their hold­ing by in­fus­ing fresh cap­i­tal, de­pend­ing upon tax im­pli­ca­tion,” the per­son said.

Emaar Prop­er­ties, which owns a 48.86% stake in the joint ven­ture in ad­di­tion to loans and guar­an­tees of about $500 mil­lion, is likely to have a big­ger share in the pie.

“In the pro­posed sep­a­ra­tion, the as­sets have been sep­a­rated in the ra­tio of 2:1,” said the sec­ond per­son quoted ear­lier. This in ef­fect means two third of as­sets will go to Emaar and one third will be owned by Shra­van Gupta, In­dian promoter of the joint ven­ture and MGF Devel­op­ment head, the per­son said and added that most of the on­go­ing or par­tially com­pleted projects will to the Emaar while Gupta will own fu­tur­is­tic projects (land).

All those projects in which Emaar has given loan guar­an­tees will log­i­cally go to the en­tity owned by the Dubai gov­ern­ment. Emaar is ex­pected to in­vest about .₹ 1,500 crore to com­plete on­go­ing projects, said a per­son in­volved in ad­vis­ing the sep­a­ra­tion.

In a state­ment to the BSE, Emaar MGF Land said it has de­cided to take steps for re­or­gan­i­sa­tion of the com­pany through a de­merger. It said the pur­pose was to lend greater fo­cus to busi­ness oper­a­tions and

The Sep­a­ra­tion

has land bank of 9,000 acres , spread across 24 cities. of land bank is fully paid

Emaar will Emaar MGF 98%

get two third of as­sets while MGF will get one third of as­sets

has 55 projects un­der ex­e­cu­tion with saleable area of 65 mil­lion sq ft

projects, and cap­ture the po­ten­tial for fur­ther growth and ex­pan­sion. The com­pany’s board ap­proved the de­merger at its meet­ing on April 11. ET had re­ported the likely split of the two part­ners on July 21 last year. The en­tire de­merger process is likely to be com­pleted by March 2017. The JV will file the de­merger scheme with the court in the next 60 days, an of­fi­cial quoted above said.

“Both part­ners were in dis­cus­sions to fi­nalise the con­tours of sep­a­ra­tion ex­er­cise for nearly a year. They were in dis­cus­sion to thrash out the var­i­ous is­sues with re­gard to debt and partly com­pleted pro- jects that were stuck due to paucity of funds,” said a per­son fa­mil­iar with the devel­op­ment. “It was a com­pli­cated process as it in­volves many run­ning projects and large land parcels of about 9,000 acres spread over var­i­ous cities,” he said.

Another per­son said Shra­van Gupta is likely to move out In­dia. “Gupta is no longer keen to ac­tively par­tic­i­pate in the man­age­ment of the JV that was key is­sue for sep­a­ra­tion.” Both sides have ap­pointed real es­tate and tax con­sul­tants for fi­nal­iz­ing a pos­si­ble deal, they said. Emaar was ad­vised by J Sa­gar As­so­ci­ates and Dua As­so­ci­ates ad­vised Gupta.

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