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
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
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.