We may launch IPO within 90 days: Emaar Properties chairman

Emaar Properties chairman, Mohammed A Alabbar, also the senior aide to Dubai’s ruler, who was on a whistle-stop visit to India, spoke to DNA on the group’s housing project for the 2010 Commonwealth Games, plans for London, IPO in India, learnings from the global recession, bureaucratic hurdles across the globe, and much more. Emaar MGF executive vice chairman, Shravan Gupta, also joined Alabbar during the interview.  Excerpts:

What does the Emaar MGF Commonwealth housing project mean to you?
It is a very important project for us; it is a partnership with the government, which has been a challenging and rewarding experience for us. We have been able to deliver the project on time, during the most difficult time. We had 12,000 workers on site for the construction for 18 months. It has been a great learning experience for us, we are very happy with the end result, we have sold over 90% of the inventory. It clearly demonstrates that as an organisation we have strength and capability to deliver projects, and that is the vision of the promoters.

Are you involved with any such project for the upcoming Asian Games in China and the 2012 London Olympics?
Frankly, the Chinese market is out of our reach currently. But I see London as a place where we can do well. We have offices there, but are not planning anything immediately. But again margin wise, corporate opportunity wise, Asia is much more opportunistic.

On the luxury side, end of 2008 and throughout 2009, that segment suffered the most in Delhi, Mumbai and Bangalore… But now some uptrends can be seen in the luxury market. What is your take?
It was not just in India, the crash was worldwide. But, all along we have been trying to pay out attention to middle to up-market housing and that is where we see demand. It is also a matter of location and because of the location we have to go up, and we are doing it. But we are not doing lower income housing, because you have to have the state of mind from the way you operate or work or you think for construction purpose. We have structured our mind.

Anyone who is in the low income housing and do not do their homework well, are waiting for a surprise. But I feel people should go for low income housing as it is their social responsibility. But our focus is different.

How is Emaar doing in Dubai? You recently rolled over $1.23 billion of debt and have also refused to participate in consolidation with Dubai Holding entities.
We are a public company operating in 16 countries, whether it is Dubai, Riyadh or Mumbai, we have laws relating to credit finance, etc. which has been done. As a company, our debt equity ratio is just a quarter, which is very low. Dubai market is stabilizing, which has started to move up, but at a slow pace.

What lessons did you learn from the global recession?
The leverage story is something we should have been careful about. I remember people coming to us and saying that “you should have more debt on your balance sheet”…. I told them that I do not want to borrow, but they kept on forcing. After that some other banker came to us and said “give us the money back”. That trend was alarming. It was a good lesson to learn in the game of leverage. The lesson was that one must pick up right assets at the right time and that life is not always rosy. Everyone was thinking that it was love forever, but that was not there to sustain. I am glad that my team in India and I are still relatively conservative.

When is your IPO expected in India?
With the current discussions, we are trying to launch it in the next 90 days. But again it is the question of how the markets hold out. I hope there is no bad news here or from another country. We are committed to being a public company and have been working as a public company for a long time, so sooner the better.

Do you have the anchor investors for the issue?
We always had the anchor investors. When we started, we had very key firms, but the idea is to see how rest of the investors will come, what would be the price range and what would be the post IPO performance. There are a lot of factors. You see there were big negatives on real estate last year, but now that negative has turned neutral. I think anybody who survived the crisis became stronger. Today, we are selling at a reasonable price. Customers are buying our inventory, they show confidence in our brand and product. We want to get the IPO done in the same fashion.

Do you think the recent Enforcement Directorate investigation would be a hurdle for the IPO?
No, we have our Sebi approvals. There was a probe in November, nothing came out of it. I don’t know what the real agenda behind it was. That’s how life operates in India.

What are your biggest challenges in India?
The biggest challenge is to ensure that we have execution capability, serving our customers well while managing the balance sheet properly. And the challenge is how you do both to make you grow in this incredible market.

Is there any specific hurdle or challenge in the Indian market?
We work in 16 countries and every country has its own regulation and bureaucratic processes. But there are countries, where it takes much longer for clearances. If in India, it takes one year to get a clearance, it takes many more in some others. In Toronto (Canada), we got a clearance four years after applying for it.     
In India, you would target the residential or commercial projects?
It will be a combination of both, it is majority commercial at the moment, but as we move forward we will launch more commercial project and it will even out. We might go for the lease or the outright sale strategy, we have not discussed that yet … we have a good land bank.

You are also into the healthcare, education and financial services business in Dubai, what are your plans for India?
At the moment our hands are full on the real estate side, to be honest. Maybe we will build a project that needs designing schools. We can look at a model like that.

Are you going to stay invested in the JV with MGF post your public listing in India?
We will remain invested, India is a huge growth market for us.

You have operations in Pakistan also. Has that ever been a problem for you in the Indian market?
No, never. And, why should it be a problem?

You have many hospitality tie-ups such as with Hyatt, Accor and you recently exited one with Whitbread. What are the plans for these tie-ups?
They are very capital intensive and we have put all construction on that front on the backburner, we may discuss that in 2011. But we are not looking to exit any one of them at the moment.

What is your investment outlook for India?
I cannot give any projections, but we are very bullish for India for further investments.