DRAFT RED HERRING PROSPECTUS Dated September 26, 2007 Please
read Section 60B of the Companies Act, 1956 (This Draft Red Herring
Prospectus will be updated upon filing with the RoC) 100% Book
Built Issue
Emaar MGF Land Limited(The Company was incorporated as Emaar MGF
Land Private Limited on February 18, 2005 under the Companies Act,
1956, as amended. Subsequently, pursuant to a special resolution of
the shareholders of the Company at an extraordinary general meeting
held on August 8, 2007, the Company has become a public limited
company and the word private has been deleted from its name. The
fresh certificate of incorporation to reflect the new name was
issued by the Registrar of Companies, Delhi & Haryana, located
at New Delhi (the RoC) on August 13, 2007. For details of change in
name and registered office, see the section History and Certain
Corporate Matters beginning on page 96 of this Draft Red Herring
Prospectus.) Registered Office: ECE House, 28, Kasturba Gandhi
Marg, New Delhi 110 001, India Tel: +91 11 4152 1155; Facsimile:
+91 11 4152 4619 Contact Person: Mr. Surender Varma; Tel: +91 11
4120 3458; Email: [email protected] Website: www.emaarmgf.com PUBLIC
ISSUE OF 117,389,914 EQUITY SHARES OF FACE VALUE RS.10 EACH (EQUITY
SHARES) OF EMAAR MGF LAND LIMITED (EMGF, OR EMAAR MGF, OR THE
COMPANY, OR THE ISSUER) FOR CASH AT A PRICE OF RS.[] PER EQUITY
SHARE, AGGREGATING RS.[] MILLION (THE ISSUE). *THE COMPANY IS
CONSIDERING A PRE-IPO PLACEMENT OF UP TO [] EQUITY SHARES. UPON THE
COMPLETION OF THE PREIPO PLACEMENT, THE NUMBER OF EQUITY SHARES IN
THE ISSUE WILL BE REDUCED BY THE NUMBER OF EQUITY SHARES ISSUED AND
ALLOTTED IN THE PRE-IPO PLACEMENT. PRICE BAND: RS.[] TO RS.[] PER
EQUITY SHARE OF FACE VALUE RS.10 EACH. THE ISSUE PRICE IS [] TIMES
THE FACE VALUE AT THE LOWER END OF THE PRICE BAND AND [] TIMES THE
FACE VALUE AT THE HIGHER END OF THE PRICE BAND. In case of revision
in the Price Band, the Bidding Period shall be extended for three
additional working days after such revision, subject to the Bidding
Period not exceeding 10 working days. Any revision in the Price
Band, and the revised Bidding Period, if applicable, shall be
widely disseminated by notification to the Bombay Stock Exchange
Limited (the BSE) and the National Stock Exchange of India Limited
(the NSE), by issuing a press release and also by indicating the
change on the website of the Book Running Lead Managers (BRLMs) and
the terminals of the other members of the Syndicate. Pursuant to
Rule 19(2)(b) of the SCRR (as defined below), this Issue is for
less than 25% of the post-Issue capital of the Company and is
therefore being made through a 100% Book Building Process wherein
at least 60% of the Issue shall be allocated on a proportionate
basis to Qualified Institutional Buyers (QIBs), out of which 5%
shall be available for allocation on a proportionate basis to
Mutual Funds only and the remainder shall be available for
allocation on a proportionate basis to all QIBs, including Mutual
Funds, subject to valid Bids being received at or above the Issue
Price. In addition, in accordance with Rule 19(2)(b) of the SCRR, a
minimum of two million securities are being offered to the public
and the size of the Issue shall aggregate to at least Rs.1,000
million. If at least 60% of the Issue cannot be allotted to QIBs,
then the entire application money will be refunded forthwith.
Further, not less than 10% of the Issue shall be available for
allocation on a proportionate basis to Non-Institutional Bidders
and not less than 30% of the Issue shall be available for
allocation on a proportionate basis to Retail Individual Bidders,
subject to valid Bids being received at or above the Issue Price.
IPO Grading As required under the SEBI (Disclosure and Investor
Protection) Guidelines, 2000, as amended (the SEBI Guidelines) the
Company will obtain a grading of this Issue from a credit rating
agency registered with the Securities and Exchange Board of India
(SEBI), which will be disclosed in the Red Herring Prospectus filed
with the RoC. RISKS IN RELATION TO FIRST ISSUE This being the first
issue of Equity Shares of the Company, there has been no formal
market for the Equity Shares of the Company. The face value of the
Equity Shares is Rs.10 per Equity Share and the Issue Price is []
times the face value. The Issue Price (as determined by the
Company, in consultation with the BRLMs, on the basis of the
assessment of market demand for the Equity Shares by way of book
building process) should not be taken to be indicative of the
market price of the Equity Shares after the Equity Shares are
listed. No assurance can be given regarding an active and/or
sustained trading in the Equity Shares of the Company or regarding
the price at which the Equity Shares will be traded after listing.
GENERAL RISKS Investments in equity and equity-related securities
involve a degree of risk and investors should not invest any funds
in this Issue unless they can afford to take the risk of losing
their investment. Investors are advised to read the risk factors
carefully before taking an investment decision in this Issue. For
taking an investment decision, investors must rely on their own
examination of the Company and the Issue, including the risks
involved. The Equity Shares offered in the Issue have not been
recommended or approved by the SEBI, nor does SEBI guarantee the
accuracy or adequacy of the contents of this Draft Red Herring
Prospectus. Specific attention of the investors is invited to the
statements in the section Risk Factors beginning on page xi of this
Draft Red Herring Prospectus. COMPANYS ABSOLUTE RESPONSIBILITY The
Company, having made all reasonable inquiries, accepts
responsibility for and confirms that this Draft Red Herring
Prospectus contains all information with regard to the Company and
the Issue that is material in the context of the Issue, that the
information contained in this Draft Red Herring Prospectus is true
and correct in all material aspects and is not misleading in any
material respect, that the opinions and intentions expressed herein
are honestly held and that there are no other facts, the omission
of which makes this Draft Red Herring Prospectus as a whole or any
of such information or the expression of any such opinions or
intentions misleading in any material respect. LISTING The Equity
Shares offered through the Red Herring Prospectus are proposed to
be listed on the BSE and the NSE. The Company has received
in-principle approvals from the BSE and the NSE for the listing of
the Equity Shares pursuant to letters dated [] and [],
respectively. For the purposes of the Issue, the [] shall be the
Designated Stock Exchange.
GLOBAL COORDINATORS AND BOOK RUNNING LEAD MANAGERS
REGISTRAR TO THE ISSUE
Enam Securities Private Limited 801/802, Dalamal Towers Nariman
Point Mumbai 400 021 India Tel: +91 22 6638 1800 Fax: +91 22 2284
6824 Email: emaarmgfipo @enam.com Contact Person: Amit Jain
Website:www.enam.com SEBI registration number: INM000006856
DSP Merrill Lynch Limited 10th Floor, Mafatlal Centre Nariman
Point Mumbai 400 021 India Tel: +91 22 6632 8000 Fax: +91 22 2204
8518 Email: emaarmgf_ipo @ml.com Contact Person: N.S. Shekhar
Website: www.dspml.com SEBI registration number: INM000002236
Karvy Computershare Private Limited Plot No. 17-24 Vithalrao
Nagar Madhapur Hyderabad 500 081 India Tel: +91 40 2342 0815-820/ 1
800 345 4001 Fax: +91 40 2342 0814 Email: [email protected]
Contact Person: M. Murali Krishna Website: www.karvy.com SEBI
registration number: INR000000221
BOOK RUNNING LEAD MANAGERS
Citigroup Global Markets India Private Limited 12th Floor,
Bakhtawar 229, Nariman Point Mumbai 400 021 India Tel: +91 22 6631
9999 Fax: +91 22 6631 9803 Email: investors.cgmib @citi.com Contact
Person: Rajiv Jumani Website: www.citibank.co.in SEBI registration
number: INM000010718
Goldman Sachs (India) Securities Private Limited Rational House,
951A Appasaheb Maratha Marg Prabhadevi Mumbai 400 025 India Tel:
+91 22 6616 9000 Fax: +91 22 6616 9090 Email: emaarmgf_issue
@gs.com Contact Person: Sachin Dua Website: www.gs.com/
country_pages/India SEBI registration number: INM000011054
HSBC Securities and Capital Markets (India) Private Limited
52/60, Mahatma Gandhi Road Fort Mumbai 400 001 India Tel: +91 22
2268 1259 Fax: +91 22 2263 1984 Email: emaarmgfipo @hsbc.co.in
Contact Person: Abhishek Saha Website: www.hsbc.co.in SEBI
registration number: INM000010353
J.P. Morgan India Private Limited Mafatlal Centre 9th Floor
Nariman Point Mumbai 400 021 India Tel: +91 22 2285 5666 Fax: +91
22 6639 3091 Email: emaar_ipo @jpmorgan.com Contact Person: Rohit
Ramana Website: www.jpmipl.com SEBI registration number:
INM000002970
Kotak Mahindra Capital Company Limited 3rd Floor, Bakhtawar 229,
Nariman Point Mumbai 400 021 India Tel: +91 22 6634 1100 Fax: +91
22 2284 0492 Email: [email protected] Contact Person:
Chandrakant Bhole Website: www.kotak.com SEBI registration number:
INM000008704
BID/ISSUE PROGRAMBID/ISSUE OPENS ON BID/ISSUE CLOSES ON [], 2007
[], 2007
TABLE OF CONTENTS PageSECTION I:
GENERAL.................................................................................................................................................................i
DEFINITIONS AND ABBREVIATIONS
...............................................................................................................................i
PRESENTATION OF FINANCIAL, INDUSTRY AND MARKET
DATA............................................................................viii
FORWARD-LOOKING STATEMENTS
................................................................................................................................x
SECTION II: RISK FACTORS
.....................................................................................................................................................xi
RISK FACTORS
......................................................................................................................................................................xi
SECTION III:
INTRODUCTION..................................................................................................................................................1
SUMMARY
.............................................................................................................................................................................1
THE ISSUE
..............................................................................................................................................................................8
SUMMARY FINANCIAL
INFORMATION...........................................................................................................................9
GENERAL
INFORMATION...................................................................................................................................................11
CAPITAL STRUCTURE
.........................................................................................................................................................20
OBJECTS OF THE
ISSUE.......................................................................................................................................................31
BASIS FOR ISSUE
PRICE......................................................................................................................................................36
STATEMENT OF TAX BENEFITS
........................................................................................................................................39
SECTION IV: ABOUT THE COMPANY
....................................................................................................................................49
INDUSTRY
OVERVIEW........................................................................................................................................................49
OUR
BUSINESS......................................................................................................................................................................59
REGULATIONS AND POLICIES
..........................................................................................................................................90
HISTORY AND CERTAIN CORPORATE
MATTERS..........................................................................................................96
OUR MANAGEMENT
............................................................................................................................................................377
OUR PROMOTERS AND PROMOTER GROUP COMPANIES
...........................................................................................399
RELATED PARTY TRANSACTIONS
...................................................................................................................................465
DIVIDEND POLICY
...............................................................................................................................................................466
SECTION V: FINANCIAL INFORMATION
..............................................................................................................................467
FINANCIAL STATEMENTS
..................................................................................................................................................467
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF
OPERATIONS........................................................................................................................................563
SUMMARY OF SIGNIFICANT DIFFERENCES AMONG INDIAN GAAP AND U.S. GAAP
...........................................576 OUR INDEBTEDNESS
...........................................................................................................................................................580
SECTION VI: LEGAL AND OTHER
INFORMATION.............................................................................................................589
OUTSTANDING LITIGATION AND MATERIAL DEVELOPMENTS
...............................................................................589
GOVERNMENT AND OTHER
APPROVALS.......................................................................................................................636
OTHER REGULATORY AND STATUTORY
DISCLOSURES............................................................................................636
SECTION VII: ISSUE INFORMATION
......................................................................................................................................665
TERMS OF THE ISSUE
..........................................................................................................................................................665
ISSUE
STRUCTURE...............................................................................................................................................................668
ISSUE PROCEDURE
..............................................................................................................................................................671
SECTION VIII: MAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION
..................................................................697
MAIN PROVISIONS OF THE ARTICLES OF
ASSOCIATION............................................................................................697
SECTION IX: OTHER
INFORMATION.....................................................................................................................................713
MATERIAL CONTRACTS AND DOCUMENTS FOR
INSPECTION..................................................................................713
DECLARATION......................................................................................................................................................................715
SECTION I: GENERAL DEFINITIONS AND ABBREVIATIONS Unless the
context otherwise indicates or requires, the following terms have
the following meanings in this Draft Red Herring Prospectus.
Company Related Terms Term The Company, the Issuer, Emaar MGF or
EMGF we or us or our or Group Accor Articles or Articles of
Association Auditors Board of Directors or Board Companies Owned by
EMGF Description Emaar MGF Land Limited, a public limited company
incorporated under the Companies Act. EMGF, the Subsidiaries, the
Companies Owned by EMGF, and the Joint Venture, on a consolidated
basis. AAPC Hotels Management Pte Limited, a company incorporated
under the laws of Singapore and part of the Accor SA Group of
Companies. The Articles of Association of the Company, as amended.
The statutory auditors of the Company being, S.R. Batliboi &
Co., Chartered Accountants. The board of directors of the Company
or a committee constituted thereof. The companies in which the
Company owns a 100% equitable interest through the Subsidiaries
specified in the section History and Certain Corporate Matters
beginning on page 96 of this Draft Red Herring Prospectus. These
companies have been consolidated in the Companys consolidated
financial statements as of and for the year ended March 31, 2007
and/or the three months ended June 30, 2007, as applicable. The
conversion of Compulsory Convertible Preference Shares issued to
Emaar Holding II into Equity Shares prior to the filing of the Red
Herring Prospectus with the RoC. The total area we develop in a
property, and includes carpet area, common area, service and
storage area and car parking. The director(s) of the Company. Emaar
Properties PJSC, a public joint stock company incorporated under
the laws of the Emirate of Dubai and the UAE. Emaar and companies
of which more than 50% of the equity voting capital is owned or
controlled directly or indirectly, by Emaar. Emaar Holding II, a
private company limited by shares incorporated under the laws of
Mauritius. The employee stock option plan adopted by the Company
for the benefit of the employees of the Company (as defined
therein) by way of a shareholders resolution dated August 31, 2007.
Equity shares of the Company of face value Rs.10 each. The joint
venture of the Company specified in the section History and Certain
Corporate Matters beginning on page 96 of this Draft Red Herring
Prospectus. Consists of the following: (i) land owned by us through
registered sale deeds and other instruments, including exchange
deeds and land held by us through registered lease deeds; (ii) land
in respect of which we have joint development rights; (iii) land in
respect of which entities have granted us sole development rights;
and (iv) land in respect of which we have been granted development
and/or acquisition rights through an agreement to sell and purchase
or a memorandum of understanding or a letter of acceptance.
Leighton International Limited, a company incorporated under the
laws of Cayman Islands and part of an Australia-based global
construction group. The memorandum of association of the Company,
as amended.
Conversion Developable Area Director(s) Emaar Emaar group Emaar
Mauritius Emaar MGF ESOP Equity Shares Joint Venture Land
Reserves
Leighton
Memorandum or Memorandum of Association MGF MGF Developments
Limited, a company incorporated under the laws of India. MGF group
MGF and companies of which more than 50% of the equity voting
capital is owned or controlled, directly or indirectly, by MGF.
i
Pre-IPO Placement Preference Shares Premier Travel Inn Promoters
Promoter Group or Promoter Group Companies Registered Office
Saleable Area Subsidiaries Turner Issue Related Terms Term Allot,
Allotment, Allotted, allot, allotment, allotted Allottee Banker(s)
to the Issue Bid Bid Amount Bid-cum-Application Form Bid/Issue
Closing Date Bid/Issue Opening Date Bidder Bidding Period Book
Building Process BRLMs or Book Running Lead Managers
The private placement of up to [] Equity Shares for cash
consideration to be completed prior to the filing of the Red
Herring Prospectus with the RoC, including Equity Shares to be
issued and Allotted pursuant to the Conversion. Preference Shares
of the Company of face value Rs.10 each. Premier Travel Inn India
Limited, a limited liability company incorporated under the laws of
England and Wales. The promoters of the Company specified in the
section Our Promoters and Promoter Group Companies beginning on
page 399 of this Draft Red Herring Prospectus. The companies or
individuals specified in the section Our Promoters and Promoter
Group Companies beginning on page 399 of this Draft Red Herring
Prospectus. The registered office of the Company, located at ECE
House, 28, Kasturba Gandhi Marg, New Delhi 110 001, India. The part
of the Developable Area relating to our economic interest in such
property. The subsidiaries of the Company specified in the section
History and Certain Corporate Matters beginning on page 96 of this
Draft Red Herring Prospectus. Turner Construction International
LLC, a company incorporated under the laws of Delaware, U.S.A.
Description The issue/allotment of Equity Shares pursuant to the
Issue. A successful Bidder to whom Equity Shares are/have been
Allotted. []. An indication to make an offer during the Bidding
Period by a prospective investor to subscribe for or purchase the
Companys Equity Shares at a price within the Price Band, including
all revisions and modifications thereto. The highest value of the
optional Bids indicated in the Bid-cum-Application Form and payable
by the Bidder upon submission of the Bid. The form in terms of
which the Bidder shall make an offer to subscribe or purchase the
Equity Shares and which will be considered as the application for
Allotment pursuant to the terms of the Red Herring Prospectus. The
date after which the members of the Syndicate will not accept any
Bids for the Issue, which shall be notified in a widely circulated
English national newspaper and a widely circulated Hindi national
newspaper. The date on which the members of the Syndicate shall
start accepting Bids for the Issue, which shall be the date
notified in a widely circulated English national newspaper and a
widely circulated Hindi national newspaper. Any prospective
investor who makes a Bid pursuant to the terms of the Red Herring
Prospectus and the Bid-cum-Application Form. The period between the
Bid/Issue Opening Date and the Bid/Issue Closing Date (inclusive of
both days) and during which prospective Bidders can submit their
Bids. The book building process as described in Chapter XI of the
SEBI Guidelines, in terms of which the Issue is being made. The
book running lead managers to the Issue, in this case being the
Global Coordinators and Citigroup Global Markets India Private
Limited, Goldman Sachs (India) Securities Private Limited, HSBC
Securities and Capital Markets (India) Private Limited, J.P. Morgan
India Private Limited and Kotak Mahindra Capital Company Limited.
The Bombay Stock Exchange Limited. Any day other than Saturday or
Sunday on which commercial banks in New Delhi are open for
business. The note or advice or intimation of allocation of Equity
Shares sent to the Bidders who have been allocated Equity Shares
after discovery of the Issue Price in accordance with the Book
Building Process.
BSE Business Day CAN or Confirmation of Allocation Note
ii
Term Cap Price
Description The higher end of the Price Band, above which the
Issue Price will not be finalised and above which no Bids will be
accepted. CDSL Central Depository Services (India) Limited.
Companies Act The Companies Act, 1956, as amended. Cut-off Price
Any price within the Price Band finalised by the Company in
consultation with the BRLMs. A Bid submitted at Cut-off Price by a
Retail Individual Bidder is a valid Bid. Only Retail Individual
Bidders are entitled to Bid at the Cut-off Price for a Bid Amount
not exceeding Rs.100,000. QIBs and NonInstitutional Bidders are not
entitled to Bid at the Cut-off Price. Depositories NSDL and CDSL.
Depositories Act The Depositories Act, 1996, as amended. Depository
A depository registered with SEBI under the SEBI (Depositories and
Participants) Regulations, 1996, as amended. Depository Participant
or DP A depository participant as defined under the Depositories
Act. Designated Date The date on which the Escrow Collection Banks
transfer the funds from the Escrow Account of the Company to the
Issue Account, after the Prospectus is filed with the RoC,
following which the Board shall Allot Equity Shares to successful
Bidders. Designated Stock Exchange The []. This draft red herring
prospectus issued in accordance with Section 60B of the Draft Red
Herring Companies Act, which does not have complete particulars of
the price at Prospectus which the Equity Shares are offered and the
size of the Issue. ECS Electronic Clearing System. Eligible NRI
NRIs from such jurisdictions outside India where it is not unlawful
to make an offer or invitation under the Issue and in relation to
whom the Red Herring Prospectus constitutes an invitation to
subscribe or purchase the Equity Shares offered thereby. Escrow
Account An account opened with an Escrow Collection Bank(s) and in
whose favour the Bidder will issue cheques or drafts in respect of
the Bid Amount when submitting a Bid and the allocation amount
collected thereafter. Escrow Agreement An agreement to be entered
into among the Company, the Registrar, the Escrow Collection
Bank(s), the BRLMs and the Syndicate Members for collection of the
Bid Amounts and for remitting refunds, if any, of the amounts
collected, to the Bidders. Escrow Collection Bank(s) The banks that
are clearing members and registered with SEBI as Bankers to the
Issue with whom the Escrow Account will be opened, comprising [].
FDI Foreign Direct Investment, as understood under applicable
Indian laws, regulations and policies. FEMA The Foreign Exchange
Management Act, 1999, as amended, and the regulations framed there
under. FII Foreign Institutional Investor (as defined under the
Securities and Exchange Board of India (Foreign Institutional
Investors) Regulations, 1995, as amended) registered with SEBI
under applicable laws in India. First Bidder The Bidder whose name
appears first in the Bid-cum-Application Form or Revision Form.
Fiscal or Financial Year or Unless otherwise stated, a period of
twelve months ended March 31 of that FY particular year, other than
with respect to the Companys financial statements for fiscal 2006,
which are for a period of approximately thirteen months, commencing
from February 18, 2005, the date of its incorporation, and ending
on March 31, 2006. Floor Price The lower end of the Price Band,
below which the Issue Price will not be finalised and below which
no Bids will be accepted. FVCIs Foreign Venture Capital Investors
(as defined under the Securities and Exchange Board of India
(Foreign Venture Capital Investor) Regulations, 2000, as amended)
registered with SEBI. GIR Number General Index Registry Number.
Global Coordinators Enam Securities Private Limited and DSP Merrill
Lynch Limited. Indian GAAP Generally accepted accounting principles
in India. Industrial Policy The policy and guidelines relating to
industrial activity in India issued by the Ministry of Commerce and
Industry, Government of India, as updated,
iii
Term Issue
Issue Account Issue Price Margin Amount MICR Monitoring Agency
Mutual Funds Mutual Fund Portion Non-Institutional Bidders
Non-Institutional Portion Non-Residents NRI or Non-Resident Indian
NSDL NSE OCB or Overseas Corporate Body
Pay-in Date
Pay-in Period
Price Band Pricing Date Prospectus QIBs or Qualified
Institutional Buyers
Description modified or amended from time to time. The public
issue of an aggregate of 117,389,914 Equity Shares at the Issue
Price. Upon the completion of the Pre-IPO Placement, the number of
Equity Shares in the Issue will be reduced by the number of Equity
Shares issued and allotted in the Pre-IPO Placement. The account
opened with the Banker(s) to the Issue to receive money from the
Escrow Account for the Issue on the Designated Date. The final
price at which Equity Shares will be Allotted in the Issue, as
determined by the Company, in consultation with the BRLMs, on the
Pricing Date. The amount paid by the Bidder at the time of
submission of the Bid, which may be between 10% and 100% of the Bid
Amount, as applicable. Magnetic Ink Character Recognition. [].
Mutual funds registered with SEBI under the SEBI (Mutual Funds)
Regulations, 1996, as amended. 5% of the QIB Portion, equal to a
minimum of [] Equity Shares, available for allocation to Mutual
Funds from the QIB Portion. All Bidders that are not Qualified
Institutional Buyers or Retail Individual Bidders and have bid for
an amount more than Rs.100,000. The portion of the Issue being not
less than 10% of the Issue consisting of [] Equity Shares,
available for allocation to Non-Institutional Bidders, subject to
valid Bids being received at or above the Issue Price. All eligible
Bidders that are persons resident outside India, as defined under
FEMA, including Eligible NRIs, FIIs registered with SEBI and FVCIs
registered with SEBI. A person resident outside India, as defined
under FEMA and who is a citizen of India or a person of Indian
origin, such term as defined under the Foreign Exchange Management
(Deposit) Regulations, 2000, as amended. National Securities
Depository Limited. The National Stock Exchange of India Limited. A
company, partnership, society or other corporate body owned
directly or indirectly to the extent of at least 60% by NRIs
including overseas trusts, in which not less than 60% of beneficial
interest is irrevocably held by NRIs directly or indirectly and
which was in existence on October 3, 2003 and immediately before
such date had taken benefits under the general permission granted
to OCBs under the FEMA. OCBs are not permitted to invest in this
Issue. The Bid/Issue Closing Date with respect to the Bidders whose
Margin Amount is 100% of the Bid Amount or the last date specified
in the CAN sent to the Bidders with respect to Bidders whose Margin
Amount is less than 100% of the Bid Amount. (i) With respect to
Bidders whose Margin Amount is 100% of the Bid Amount, the period
commencing on the Bid/Issue Opening Date and extending until the
Bid Closing Date; and (ii) With respect to Bidders whose Margin
Amount is less than 100% of the Bid Amount, the period commencing
on the Bid/Issue Opening Date and extending until the closure of
the Pay-in Date specified in the CAN. The price band with a minimum
price (Floor Price) of Rs.[] per Equity Share and the maximum price
(Cap Price) of Rs.[] per Equity Share, including all revisions
thereof. The date on which the Issue Price is finalised by the
Company, in consultation with the BRLMs. The prospectus filed with
the RoC after the Pricing Date containing, inter alia, the Issue
Price that is determined at the end of the Book Building Process,
the size of the Issue and certain other information. As defined
under the SEBI Guidelines and means public financial institutions
as defined in Section 4A of the Companies Act, scheduled commercial
banks, mutual funds, FIIs registered with SEBI, multilateral and
bilateral development financial institutions, venture capital funds
registered with SEBI,
iv
Term
QIB Margin Amount QIB Portion Refund Account Refund Bank
Registrar or Registrar to the Issue Retail Individual Bidders
Retail Portion Revision Form RHP or Red Herring Prospectus
Description foreign venture capital investors registered with
SEBI, state industrial development corporations, insurance
companies registered with the Insurance Regulatory and Development
Authority, provident funds with minimum corpus of Rs.250 million
and pension funds with minimum corpus of Rs.250 million. An amount
representing at least 10% of the Bid Amount and the amount QIBs are
required to pay at the time of submitting a Bid. The portion of the
Issue being at least 60% of the Issue consisting of [] Equity
Shares, to be allotted to QIBs on a proportionate basis. An account
opened with the Refund Bank, from which refunds of the whole or
part of the Bid Amount, if any, shall be made. []. Karvy
Computershare Private Limited. Bidders (including HUFs) who have
bid for Equity Shares of an amount less than or equal to
Rs.100,000. The portion of the Issue being not less than 30% of the
Issue consisting of [] Equity Shares, available for allocation to
Retail Individual Bidder(s), subject to valid Bids being received
at or above the Issue Price. The form used by the Bidders to modify
the quantity of Equity Shares or the Bid price in any of their
Bid-cum-Application Forms or any previous Revision Form(s). The red
herring prospectus dated [] issued in accordance with Section 60B
of the Companies Act, which does not have complete particulars of
the price at which the Equity Shares are offered and the size of
the Issue. The Red Herring Prospectus will be filed with the RoC at
least three days before the Bid/Issue Opening Date and will become
a Prospectus upon filing with the RoC after the Pricing Date. The
Registrar of Companies, Delhi & Haryana, located at New Delhi.
Real Time Gross Settlement. The Securities Contracts (Regulation)
Act, 1956, as amended. The Securities Contracts (Regulation) Rules,
1957, as amended. The Securities and Exchange Board of India
constituted under the SEBI Act. The Securities and Exchange Board
of India Act, 1992, as amended. The Securities and Exchange Board
of India (Employee Stock Option Scheme and Employee Stock Purchase
Scheme) Guidelines, 1999, as amended. The SEBI (Disclosure and
Investor Protection) Guidelines, 2000, as amended. The BSE and the
NSE. The agreement to be entered into between the Company and the
Syndicate, in relation to the collection of Bids in this Issue. [].
The BRLMs and the Syndicate Members. The Securities and Exchange
Board of India (Substantial Acquisition of Shares and Takeovers)
Regulations, 1997, as amended. The slip or document issued by any
of the members of the Syndicate to a Bidder as proof of
registration of the Bid. Generally accepted accounting principles
in the United States of America. The BRLMs and the Syndicate
Members. The agreement between the Underwriters and the Company to
be entered into on or after the Pricing Date. Venture Capital Funds
(as defined under the Securities and Exchange Board of India
(Venture Capital Fund) Regulations, 1996, as amended) registered
with SEBI.
RoC RTGS SCRA SCRR SEBI SEBI Act SEBI ESOP Guidelines SEBI
Guidelines Stock Exchanges Syndicate Agreement Syndicate Member[s]
Syndicate or members of the Syndicate Takeover Code TRS or
Transaction Registration Slip U.S. GAAP Underwriters Underwriting
Agreement VCFs
Industry Related Terms Term AAI Acre or acre Description
Airports Authority of India. Equals 43,560 Sq. ft.
v
Term EDC FSI Gunta IDC IDW LoI MoU NCR SBA SEZ Sq. ft. Sq. mt.
Tier I Tier II Other Abbreviations/Terms Term A/c AS CAGR CARE CCTV
CRM Customs Act DIPP EGM EPS ERP FCNR Account FDI FIPB GDP GoI or
Government HUF ICRA IPO IT I.T. Act ITES I.T. Rules NAV NRE Account
NRO Account p.a. P/E Ratio PAN PLR RBI RoNW Rs. SICA SEZ Act U.A.E.
or UAE
Description External development charges. Floor Space Index,
which is the ratio of the combined gross floor area of all floors
of the buildings on a certain plot of land to the total area of the
plot. Equals 1,089 Sq. ft. Internal development charges. Internal
development works. Letter of Intent. Memorandum of Understanding.
National Capital Region of Delhi. Super Built up Area. Special
Economic Zone. Square Feet. Square Metre. Cities in India with a
population exceeding 5 million. Cities in India with a population
between 2 to 5 million.
Description Account. Accounting Standards as issued by the
Institute of Chartered Accountants of India. Compound Annual Growth
Rate. Credit Analysis and Research Limited, a credit rating agency
in India. Closed circuit television. Customer relationship
management. The Customs Act, 1962, as amended. The Department of
Industrial Policy and Promotion, Ministry of Commerce and Industry,
Government of India. Extraordinary general meeting. Earnings per
share, i.e., profit after tax for a Fiscal/period divided by the
weighted average number of equity shares/potential equity shares
during that Fiscal/period. Enterprise resource planning. Foreign
Currency Non-Resident Account. Foreign Direct Investment. The
Foreign Investment Promotion Board of the Government of India.
Gross Domestic Product. Government of India. Hindu Undivided
Family. ICRA Limited, a credit rating agency in India. Initial
Public Offering. Information Technology. The Income Tax Act, 1961,
as amended. Information technology enabled services. The Income Tax
Rules, 1962, as amended. Net Asset Value. Non-Resident External
Account. Non-Resident Ordinary Account. Per annum. Price/Earnings
Ratio. Permanent Account Number. Prime Lending Rate. The Reserve
Bank of India. Return on Net Worth. Indian Rupees. The Sick
Industries Companies (Special Provisions) Act, 1985, as amended.
Special Economic Zones Act, 2005, as amended. The United Arab
Emirates.
vi
Term U.K. U.S., US or USA
Description The United Kingdom of Great Britain and Northern
Ireland. The United States of America.
vii
PRESENTATION OF FINANCIAL, INDUSTRY AND MARKET DATA Financial
Data The financial data in this Draft Red Herring Prospectus is
derived from the Companys restated consolidated financial
statements, as of and for the fiscal year ended March 31, 2007 and
the three months ended June 30, 2007, prepared in accordance with
Indian GAAP, the Companies Act and restated in accordance with the
SEBI Guidelines and, for the period prior to April 1, 2006, since
the Company was a standalone entity without Subsidiaries, from the
restated unconsolidated financial statements of the Company for the
period commencing from February 18, 2005, the date of incorporation
of the Company, until March 31, 2006, prepared in accordance with
Indian GAAP, the Companies Act and restated in accordance with the
SEBI Guidelines. The Companys fiscal year commences on April 1 and
ends on March 31, so all references to a particular fiscal year are
to the twelve-month period ended March 31 of that year, other than
with respect to the Companys financial statements for fiscal 2006,
which are for a period of approximately thirteen months, commencing
from February 18, 2005, the date of its incorporation, and ending
on March 31, 2006. In this Draft Red Herring Prospectus, any
discrepancies in any table between the total and the sums of the
amounts listed are due to rounding off. There are significant
differences between Indian GAAP and U.S. GAAP; accordingly, the
degree to which the Indian GAAP financial statements (consolidated
or unconsolidated) included in this Draft Red Herring Prospectus
will provide meaningful information is entirely dependent on the
readers level of familiarity with Indian accounting practices,
Indian GAAP, the Companies Act and the SEBI Guidelines. Any
reliance by persons not familiar with Indian accounting practices,
Indian GAAP, the Companies Act and the SEBI Guidelines on the
financial disclosures presented in this Draft Red Herring
Prospectus should accordingly be limited. The Company has not
attempted to quantify those differences or their impact on the
financial data included herein, and you should consult your own
advisors regarding such differences and their impact on our
financial data. For more information on these differences, see the
section Summary of Significant Differences between Indian GAAP and
U.S. GAAP beginning on page 576 of this Draft Red Herring
Prospectus. Unless otherwise specified or if the context otherwise
requires, all references to India in this Draft Red Herring
Prospectus are to the Republic of India, together with its
territories and possessions, all references to the US or the USA or
the United States or the U.S. are to the United States of America,
together with its territories and possessions and all references to
U.A.E. or UAE are to the United Arab Emirates, together with its
territories and possessions. Currency of Presentation and Exchange
Rates All references to Rupees or Rs. or INR are to Indian Rupees,
the official currency of the Republic of India. All references to
$, US$, USD, U.S.$, U.S. Dollar(s) or US Dollar(s) are to United
States Dollars, the official currency of the United States of
America; all references to AED or U.A.E. Dirham or DH or Dhs are to
United Arab Emirates Dirham, the official currency of United Arab
Emirates; all references to CY or CYP are to Cyprus Pound, the
official currency of Cyprus; and all references to SGD are to
Singapore Dollar, the official currency of Singapore. This Draft
Red Herring Prospectus contains translations of certain U.S. Dollar
and other currency amounts into Indian Rupees (and certain Indian
Rupee amounts into U.S. Dollars and other currency amounts). These
have been presented solely to comply with the requirements of
Clause 6.9.7.1 of the SEBI Guidelines. These translations should
not be construed as a representation that such Indian Rupee or U.S.
Dollar or other currencies could have been, or could be, converted
into Indian Rupees, as the case may be, at any particular rate or
at all. Unless otherwise specified, all currency translations
provided herein have been made based on the exchange rates
specified by www.bloomberg.com. Industry and Market Data Unless
stated otherwise, industry data used in this Draft Red Herring
Prospectus has been obtained from industry publications. Industry
publications generally state that the information contained in
those publications has been obtained from sources believed to be
reliable but that their accuracy and
viii
completeness are not guaranteed and their reliability cannot be
assured. Although we believe that the industry data used in this
Draft Red Herring Prospectus is reliable, it has not been verified
by any independent source. In this Draft Red Herring Prospectus, we
have used market and industry data prepared by consultants and
government organisations such as CRIS INFAC, NCAER, HVS
International, Cushman & Wakefield (India) Private Limited,
Jones Lang LaSalle, and Centre for Monitoring Indian Economy, some
of whom we have also retained or may retain and compensate for
various engagements in the ordinary course of business. Further,
the extent to which the market data presented in this Draft Red
Herring Prospectus is meaningful depends on the readers familiarity
with and understanding of the methodologies used in compiling such
data. There are no standard data gathering methodologies in the
industry in which we conduct our business, and methodologies and
assumptions may vary widely among different industry sources.
ix
FORWARD-LOOKING STATEMENTS This Draft Red Herring Prospectus
contains certain forward looking statements. These forward looking
statements can generally be identified by words or phrases such as
will, shall, aim, will likely result, believe, expect, will
continue, anticipate, estimate, intend, plan, contemplate, seek to,
future, objective, goal, project, should, will pursue and similar
expressions or variations of such expressions. Similarly,
statements that describe our objectives, strategies, plans or goals
are also forward-looking statements. All forward looking statements
are subject to risks, uncertainties and assumptions about us that
could cause actual results to differ materially from those
contemplated by the relevant forward-looking statement. Important
factors that could cause actual results to differ materially from
the Companys expectations include, among others: our ability to
manage our growth effectively; our ability to compete effectively,
particularly in regional markets; the performance of the real
estate market and the availability of real estate financing in
India; our ability to replenish our Land Reserves and identify
suitable sites at reasonable cost; impairment of our title to land;
our ability to procure contiguous parcels of land; our ability to
obtain permits or approvals in time or at all; our ability to
identify suitable projects; our ability to develop all of our Land
Reserves; financial stability of our commercial, retail and hotel
tenants as well as our prospective tenants or customers; risks
associated with using services of third parties; our ability to
build malls in appropriate locations and attract suitable retailers
and customers; our ability to anticipate and respond to customer
requirements; raw material costs and shortages; changes in
government policies, laws, regulations and regulatory actions that
apply to or affect our business; our ability to continue to benefit
from our relationship with our Promoters; our dependence on our
senior management and key personnel; our ability to successfully
implement our strategy and our growth and expansion plans;
contingent liabilities, environmental problems and uninsured
losses; failure in our IT systems; the continued availability of
applicable tax benefits; the extent to which our projects qualify
for percentage of completion revenue recognition; possible
conflicts of interest with the Promoters, the Promoter Group and
other related parties; the outcome of legal or regulatory
proceedings that we are or might become involved in; general
economic and business conditions in India; and changes in political
conditions and regulatory framework in India.
For a further discussion of factors that could cause our actual
results to differ, see the sections Risk Factors, Business and
Managements Discussion and Analysis of Financial Condition and
Results of Operations beginning on pages xi, 59 and 563,
respectively, of this Draft Red Herring Prospectus. By their
nature, certain market risk disclosures are only estimates and
could be materially different from what actually occurs in the
future. As a result, actual future gains or losses could materially
differ from those that have been estimated. Forward looking
statements speak only as of the date of this Draft Red Herring
prospectus. Neither the Company, its Directors and officers, any
Underwriter, nor any of their respective affiliates or associates
has any obligation to update or otherwise revise any statements
reflecting circumstances arising after the date hereof or to
reflect the occurrence of underlying events, even if the underlying
assumptions do not come to fruition. In accordance with SEBI
requirements, the Company and the BRLMs will ensure that investors
in India are informed of material developments until such time as
the grant of final listing and trading permission by the Stock
Exchanges for the Equity Shares allotted pursuant to the Issue.
x
SECTION II: RISK FACTORS RISK FACTORS An investment in our
Equity Shares involves a high degree of risk. You should carefully
consider all the information in this Draft Red Herring Prospectus,
including the risks and uncertainties described below, before
making an investment in our Equity Shares. If any or some
combination of the following risks actually occur, our business,
prospects, financial condition, results of operations and the value
of our properties could suffer, the trading price of our Equity
Shares could decline and you may lose all or part of your
investment. We have described the risks and uncertainties that our
management believes are material, but these risks and uncertainties
may not be the only ones we face. Additional risks and
uncertainties, including those we are not aware of or deem
immaterial, may also result in decreased revenues, increased
expenses or other events that could result in a decline in the
value of the Equity Shares. The numbering of the risk factors has
been done to facilitate ease of reading and reference and does not
in any manner indicate the importance of one risk factor over
another. Internal Risk Factors Risks relating to the Company 1.
Emaar MGF is a recently formed company with a limited operating
history and therefore investors will only have limited past results
on which to base their assessment of us. We were incorporated on
February 18, 2005 and have financial statements for only two
completed fiscal years and for the three months ended June 30, 2007
which are included in the Draft Red Herring Prospectus. As a result
of our short operating history, we do not have any completed
projects and prospective investors will have limited information
with which to evaluate the quality of our projects and our current
or future prospects and on which to base their investment decision.
Companies in their initial stages of development present
substantial business and financial risks and may present much
higher investment risk. We have incurred operating losses in our
first two fiscal years of operation. We anticipate that we will
have limited revenue in the immediate future and as a result our
operating losses may continue in the short term. There can be no
assurance that we will achieve and sustain profitability in the
near future. 2. If we are unable to manage our growth effectively,
our business and financial results will be adversely affected. We
are a new company and are embarking on a growth strategy, which
involves an expansion of our current business lines as well as a
diversification into new business areas such as education,
healthcare and infrastructure development. As a new company with
limited prior experience in the real estate sector, our proposed
expansion and diversification will place significant demands on our
management as well as our financial, accounting and operating
systems. In order to manage growth effectively, we must implement
and improve operational systems, procedures and controls on a
timely basis, which, as we grow and diversify, we may not be able
to implement, manage or execute our projects efficiently in a
timely manner or at all, which could result in delays, increased
costs and diminished quality and may adversely affect our results
of operations and our reputation. If we are unable to manage our
growth effectively, our business and financial results will be
adversely affected. 3. Our revenues and profits will be difficult
to predict and can vary significantly across periods, which could
cause the price of our Equity Shares to fluctuate. Under our
current business model, revenues and profits are expected to be
derived primarily from the sale or leasing of residential,
commercial, retail and hospitality properties. While rental and
hospitality income can be relatively stable it will reduce our cash
flows in the short term and increase the number of periods over
which cash would be recovered from such a project, revenues from
sales are dependent on various factors such as the size of our
developments, the extent to which they qualify for percentage of
completion treatment (see the section headed Managements Discussion
& Analysis of Financial
xi
Condition and Results of Operations beginning on page 563 of
this Draft Red Herring Prospectus) under our revenue recognition
policies, the rights of lessors or third parties that could impair
our ability to sell or lease properties and general market
conditions. In addition, the anticipated completion dates for our
projects, including those set forth in this Draft Red Herring
Prospectus, are estimates based on current management expectations
and could change significantly, thereby affecting the timing of our
sales or lease commencement dates. The combination of any of these
factors may result in significant variations in our revenues and
profits across periods. Therefore, we believe that period-to-period
comparisons of our results of operations will not necessarily be
meaningful and should not be relied upon as indicative of our
performance. If in the future our results of operations are below
market expectations, the price of our Equity Shares could decline.
4. We benefit from our relationship with Emaar and MGF and our
business and growth prospects may decline if we cannot benefit from
this relationship in the future. We benefit from our relationship
with Emaar and MGF in many ways. We have access to Emaars brand
name, development expertise and international experience. We also
seek to benefit from MGFs local knowledge and capabilities. Given
our relationship with Emaar we have been able, and intend to
continue, to use Hamptons Group Limited, which is a global property
sales, management and development services company, to sell and
market our properties in U.K. and other markets. We have entered
into arrangements with Emaar Hills Township Private Limited and
Boulder Hills Leisure Private Limited, subsidiaries of Emaar,
pursuant to which we have agreed to develop an integrated master
planned community called Boulder Hills in Hyderabad. We also have
sole and joint development arrangements with other partners and
proportionate interests in lands owned indirectly by the Company.
Our future success is influenced, in part, by our continued
relationship with Emaar and MGF. We cannot assure you that we will
be able to continue to avail of benefits from this relationship in
the future. If we lose the current benefits of our relationship,
our business and growth prospects may decline and our financial
condition and results of operations may be adversely affected. 5.
We will continue to be controlled by our Promoters and certain
Promoter Group entities after the completion of the Issue. One of
our investor will continue to have certain rights after the
completion of the Issue. After the completion of the Issue, our
Promoters along with certain Promoter Group entities will control,
directly or indirectly, approximately 85.7 per cent of our
outstanding Equity Shares. Our Articles of Association and Joint
Venture Agreement dated December 18, 2004, as amended, among Emaar,
MGF and Sareen Estates Private Limited (the Emaar MGF Joint Venture
Agreement) confer certain rights on our Promoters, Emaar and MGF,
relating to the governance of the Company. Each of Emaar Mauritius
and MGF has the right to appoint three Directors on the Board, MGF
has the right to appoint and remove the Managing Director and the
Chief Executive Officer of the Company and Emaar Mauritius has the
right to appoint and remove the Chairman of the Board (who has a
tie casting vote) and the Chief Financial Officer of the Company.
In addition, our Articles of Association provide that any decision
of the Board in favour of a resolution requires the affirmative
vote of at least one nominee Director of each of Emaar Mauritius
and MGF. As a result, our Promoters will continue to exercise
significant control over us, including being able to control the
composition of our Board and determine matters requiring
shareholder approval or approval of our Board. Our Promoters may
take or block actions with respect to our business, which may
conflict with our interests or the interests of our minority
shareholders. By exercising their control, our Promoters could
delay, defer or cause a change of our control or a change in our
capital structure, delay, defer or cause a merger, consolidation,
takeover or other business combination involving us, discourage or
encourage a potential acquirer from making a tender offer or
otherwise attempting to obtain control of us. Pursuant to an
investment agreement, one of our investor, Citigroup Venture
Capital International Ebene Limited will continue to have certain
rights after the completion of the Issue, such as registration
rights in case of an overseas listing, and a restriction on certain
activities that the Company may engage in.
xii
For further information, see the sections History and Certain
Corporate Matters and Main Provisions of the Articles of
Association beginning on pages 96 and 697, respectively, of this
Draft Red Herring Prospectus. 6. There may be possible conflicts of
interest between us and our Promoters or the entities forming part
of our Promoter Group or with entities in which our Directors are
interested. As per the Emaar MGF Joint Venture Agreement and our
Articles of Association, Emaar and MGF have agreed that all FDI
compliant real estate development projects in India will be
undertaken solely by Emaar MGF. The Emaar MGF Joint Venture
Agreement and our Articles of Association further specify that each
of Emaar and MGF will direct to us any opportunity received by them
relating to the real estate business and will not permit or
authorise any of their respective subsidiaries, affiliates or other
associated companies to compete with us in connection with the real
estate business. However, MGF Group is free to undertake any
non-FDI compliant projects independently. While we do not believe
that this will impact our business adversely, it may impact the
time and resources that MGF Group spends on our business. Risks
relating to the Indian real estate market and competition 7. As a
new entrant to the Indian market, we may not be able to compete
effectively, particularly in regional markets. We are a recent
entrant into the Indian real estate market and our performance is
heavily dependent on our ability to buy suitable land at reasonable
prices and compete against more established and regionally strong
developers at a time when awareness of our brand is still growing.
We face significant competition from other more established real
estate developers, many of whom undertake similar projects within
the same regional markets as us and are better known in the market.
Given the fragmented nature of the real estate development
industry, we often do not have complete information about the
projects our competitors are developing and accordingly we may
underestimate supply in the market. Our business plan is to expand
across India using geographic diversity to spread our exposure to
regional demand cycles. In seeking to do this, we face the risk
that some of our competitors, who are also engaged in real estate
development but with a particular regional focus, may be better
known in some of our target markets, enjoy better relationships
with landowners in that region, gain early access to information
regarding attractive parcels of land and consequently be better
placed to acquire such land. Increasing competition in our
residential, commercial and retail businesses could result in price
and supply volatility, which could cause our business lines to
suffer. Competitors may, whether through consolidation or growth,
present more credible integrated and/or lower cost alternatives to
our projects. There can be no assurance that we may compete
effectively with our competitors in the future and failure to
compete effectively may have an adverse effect on our business,
financial condition and results of operations. In our existing
businesses, our competitors include real estate companies such as
DLF Limited, Unitech Limited and Ansal Properties Limited. 8. Our
business is heavily dependent on the performance of the real estate
market and the availability of real estate financing in India. Our
business is heavily dependent on the performance of the real estate
market in India, particularly in the regions in which we operate,
and could be adversely affected if market conditions deteriorate.
Real estate projects involve a substantial amount of time and
capital to develop, and we could incur losses if we purchase land
at high prices and we have to dispose of our developed projects on
unfavourable terms. The real estate market is significantly
affected by various factors including changes in government
policies, economic conditions, growth and expansion plans of
domestic and foreign businesses, demographic trends, employment and
income levels and interest rates, among other factors. These
factors can affect the demand for and valuation of both our
projects under development and our planned projects. Further, the
real estate market, both for land and developed properties is
relatively illiquid, as a result of factors such as high
transaction costs and time lag for completed developments, which
may limit our ability to respond promptly to market events. The
price increases experienced in the Indian real estate market over
the past three years are likely to be unsustainable. Lower interest
rates on financing from Indias retail banks and housing finance
companies, particularly for residential real estate, and favourable
tax treatment of loans, have helped
xiii
fuel the recent growth of the Indian real estate market.
However, India has experienced rising interest rates over the last
two fiscal years, with the RBI repo rate rising from 6.5 per cent
as of July 31, 2006 to 7.75 per cent as of July 31, 2007. Rising
interest rates or reduced affordability of mortgage finance could
discourage customers, particularly customers for our residential
properties, from borrowing to finance real estate purchases and
could adversely impact the real estate market. The interest rate at
which our customers borrow funds affects the affordability of, and
hence the market demand for, our residential real estate
developments. Additionally, stricter provisioning and risk
weightage norms imposed by the RBI in relation to real estate loans
by banks and housing finance companies could reduce the
attractiveness and availability of property or developer financing
and the RBI or the Government of India may take further measures
designed to reduce or having the effect of reducing credit to the
real estate sector. Our business could be adversely affected if the
demand for, or supply of, real estate financing at attractive rates
or terms were to diminish or cease to exist. 9. We may not be able
to add to or replenish our Land Reserves by acquiring suitable
sites at reasonable cost which may adversely affect our business
and prospects. In order to maintain and grow our business, we will
be required to continuously increase our Land Reserves with new
sites for development. Our ability to identify and acquire suitable
sites is dependent on a number of factors that are beyond our
control. These factors include the availability of suitable land,
the willingness of landowners to sell land and/or assign
development rights on terms attractive to us, the ability to obtain
an agreement to sell from all the owners where land has multiple
owners, the availability and cost of financing, encumbrances on
targeted land, government directives on land use and the obtaining
of permits and approvals for land acquisition and development. The
failure to acquire or obtain development rights over targeted or
purchased land may cause us to modify, delay or abandon entire
projects, which in turn could cause our business to be adversely
affected. Further information on our Land Reserves is contained in
Our Business Description of our Business Land Reserves on page 66
of this Draft Red Herring Prospectus. In addition, land acquisition
in India has historically been subject to regulatory restrictions
on foreign investment. These restrictions are gradually being
relaxed and, combined with the aggressive growth strategies and
financing plans of real estate development companies as well as
real estate investment funds in the country, this is in some cases
making suitable land increasingly expensive. If we are unable to
compete effectively in the acquisition of suitable land, our
business and prospects will be adversely affected. 10. We face
uncertainty of title to our lands. The difficulty of obtaining
title guarantees in India means that title records provide only for
presumptive rather than guaranteed title. The title to these lands
is often fragmented. Some of these lands may have irregularities of
title, such as non-execution or non-registration of conveyance
deeds and inadequate stamping and may be subject to encumbrances of
which we may not be aware. For most of our land we have not yet
completed the mutation process, which is the process by which our
name is reflected in the local authority revenue records as owner
of the land, and/or obtained non-encumbrance certificates from
relevant authorities. In addition, our projects may be executed in
collaboration with third parties. In some of these projects, the
land may be owned by one or more of such third parties. In such
instances, we cannot assure you that the persons with whom we enter
into collaboration agreements have clear title to such lands. While
we conduct due diligence and assessment exercises prior to
acquiring land, we may not be able to assess or identify all risks
and liabilities associated with the land, such as faulty or
disputed title, unregistered encumbrances or adverse possession
rights. Most of our land is located in areas where the vernacular
languages, such as Gurmukhi, are the principal languages used in
the sale deed documentation and registration process, and we rely
on local expertise in our due diligence and documentation. As a
result, not all of our lands may have guaranteed title or title
that has been independently verified. The uncertainty of title to
land makes the acquisition and development process more
complicated, may impede the transfer of title, expose us to legal
disputes, adversely affecting our land valuations and our business
and financial condition. Legal disputes in respect of land title
can take several years and considerable expense to resolve if they
become the subject of court proceedings. The outcome of such legal
proceedings can be uncertain. If
xiv
we, or the owners of the land which is the subject of our
development agreements, are unable to resolve such legal disputes
or title defects, we may lose our interest in the land. Our ability
to develop such land may be impaired pending the resolution of such
dispute. The failure to obtain good title to a particular plot of
land may prejudice the success of a development for which that plot
is a critical part and may require us to write off expenditures in
respect of the development. 11. It is often impracticable to obtain
legal opinions in respect of land title in India and we have not
obtained title opinions for a portion of our land comprising our
Land Reserves. There may be a number of uncertainties relating to
land title in India including, among other things, difficulties in
obtaining title guarantees and fragmented or defective title (see
We face uncertainty of title to our lands on page xiv). While we
seek to retain lawyers to conduct due diligence and assessment
exercises and issue title search reports prior to acquiring land,
entering into joint or sole development agreements with land
owners, and undertaking projects, it is impracticable for counsel
to give legal opinions satisfying various technical legal
requirements which arise out of court decisions because of the
uncertainties discussed above. Prospective investors should note
that neither legal counsel to the Issuer nor to the Underwriters is
providing opinions in respect of title to our Land Reserves.
Additionally, title insurance is not commercially available in
India to guarantee title or development rights in respect of land.
The absence of title insurance in India means that we face a risk
of loss of land we believe we own or have development rights over,
which would have an adverse effect on our business, financial
condition and results of operations. For details on the Land
Reserves, see Our Business Description of our Business Land
Reserves on page 66. 12. Our inability to procure contiguous
parcels of land may affect our future development activities. We
seek to acquire parcels of land and development rights over parcels
of land in various locations, over a period of time, for future
development. In some cases, these parcels of land may be
consolidated to form a contiguous landmass, upon which we can
undertake development. However, we may not be able to procure such
parcels of land at cost effective prices or on other terms that are
acceptable to us or at all, which may affect our ability to
consolidate parcels of land into a contiguous mass. Failure to
acquire such parcels of land may cause delays or force us to
abandon or modify the development of the land in such locations,
which may further result in us failing to realise our investment
for acquiring such parcels of land. Accordingly, our inability to
procure contiguous parcels of land or enter into development
agreements with the land owners may adversely affect our business
prospects, financial condition and results of operations. 13. We
enter into MoUs, agreements to purchase and similar agreements with
third parties to acquire land or development rights which entails
certain risks. We enter into MoUs, agreements to purchase and
similar agreements with third parties to acquire title or land
development rights with respect to certain land. Since we do not
acquire ownership or land development rights with respect to such
land upon the execution of such MoUs, formal transfer of title or
land development rights with respect to such land is completed
after we have conducted satisfactory due diligence and/or requisite
governmental consents and approvals have been obtained and/or we
have paid all of the consideration for such land. As a result, we
are subject to the risk that pending such consents and approvals,
payment of considerations or our due diligence, sellers may
transfer the land to other purchasers or that we may never acquire
formal title or land development rights with respect to such land,
which could have an adverse impact on our business. Of our total
Land Reserves of 542.0 million square feet of Saleable Area, we
have entered into MoUs and agreements to purchase and similar
agreements with third parties to acquire land or land development
rights in respect of 39 million square feet, representing 7.16 per
cent of our total Saleable Area. For further details in relation to
our Land Reserves, see the section Business Description of Our
Business Land Reserves on page 66 of this Draft Red Herring
Prospectus. We also make partial payments to third parties to
acquire certain land or land development rights which we may be
unable to recover under certain circumstances. We cannot assure you
that the acquisition of such land or land development rights will
be completed in a timely manner, at the intended cost, or at all.
In the event that we are unable to acquire such land or land
development rights, we may be unable to recover the partial payment
made by us with respect to that land. Our inability to acquire such
land or land development rights, or if we fail to recover the
partial payment made by us with respect to such land, may adversely
affect our business, financial condition and results of
operation.
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Further, certain third parties with whom we have entered into
such agreements may not have ownership rights or clear title over
such land or may have created encumbrances over such land or have
litigation pending with respect to such lands or may have to comply
with certain conditions before the title to such land or land
development rights may be conveyed to us. Until ownerships rights
or clear title has been obtained, litigation is settled, such
conditions have been complied with or a judgment has been obtained
by a court of competent jurisdiction, we may be unable to utilise
such lands according to the terms of such agreements which could
adversely affect our business, financial condition and results of
operations. 14. We currently undertake and in the future will
undertake certain projects by entering into development agreements
with third parties, which may entail certain risks. We engage in
certain projects by entering into development agreements with third
parties that own title to land or are in the process of obtaining
title to land and we, by virtue of a development agreement, acquire
development rights to such land. Certain parties granting us
development rights have not yet acquired ownership rights or clear
title in respect of land that we have categorised as part of our
Land Reserves. As of August 31, 2007, such land comprised in the
aggregate approximately 2,050 acres, representing approximately 17%
of our Land Reserves and includes for example (i) land in Punjab
and Delhi where the parties granting us development rights have
beneficial interest over land through arrangements or agreements,
including land pooling schemes, and (ii) land in Pune where the
party granting us development rights is the registered owner in
respect of only 225 acres of land of the total area of 520 acres
and has entered into MoUs/agreements to sell and purchase or is in
negotiations with the owners of land to acquire the remaining land.
Parties granting us development rights may also have litigation
pending with respect to such lands. We cannot assure you that the
third parties with whom we have entered into such agreements will
be successful is acquiring ownership rights or clear title to such
land. If such irregularities exist in respect of land over which we
have joint or sole development rights, we may not be able to
develop and/or acquire such land, which could have an adverse
effect on our financial condition and results of operations.
Further, we are generally required to obtain approvals and licenses
in respect of the project under development and complete the
project within a specified period of time, failing which the
agreement may be terminated and/or our security deposit may be
forfeited and/or we may be required to pay compensation and/or
liquidated damages. We generally bear the costs of development of
the land, including payments in respect of license fees, obtaining
and/or renewing licenses, change of land use and other expenses
relating to sanctioning of plans and completion. Upon the
completion of the development, we are entitled to acquire (i)
right, title and interest over 100% of the total developed area of
the land or (ii) right, title and interest over a specified
proportion (not all) of the total developed area of the land or a
specified portion of the gross or net revenue generated from the
developed project. In certain agreements, our development rights or
entitlement to a specified proportion of the revenue generated from
the project is for a specified period of time. For example, in
Andhra Pradesh, under an assignment agreement dated November 3,
2006, our rights over 235 acres of land to be developed as a golf
course are for a term of 66 years after which the developed project
reverts back to Andhra Pradesh Industrial Infrastructure
Corporation Limited, the lessor of the land. In certain agreements,
we are not entitled to assign the agreement in favour of our
associates or Subsidiaries unless the written consent of the entity
granting us development rights is obtained. We also sometimes enter
into joint development agreements pursuant to which we share the
development rights with our joint development partner. If a joint
developer fails to perform its obligations in a satisfactory
manner, the joint partnership may be unable to successfully
complete the intended project on the intended timetable, at the
intended cost, or at all. Further, such parties may have business
interests or goals that are inconsistent with ours, such that
disputes may arise which could cause delays in completion, or the
complete abandonment, of the project. For a detailed description of
our Land Reserves, see Our Business Description of our Business
Land Reserves on page 66.
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15. Most of our projects are in the preliminary stages of
planning and require approvals or permits and we are required to
fulfil certain conditions precedent in respect of some of them. Our
plans in relation to a significant number of our intended projects
in our four business lines (residential, commercial, retail and
hospitality) and other initiatives (healthcare, education and
infrastructure) have yet to be finalised and approved. We require
statutory and regulatory approvals and permits and applications
need to be made at appropriate stages for us to successfully
execute each of these projects. For example, we are required to
obtain requisite environmental consents, fire safety clearances,
no-objection from the Airport Authority of India and the
commencement, completion and occupation certificates from the
competent governmental authorities. Of our total Land Reserves of
12,544 acres, approximately 83 per cent comprises agricultural land
for which we and our joint development partners have not yet
obtained a certificate of change of land use. We are currently in
the process of converting another 10 per cent of our total Land
Reserves into non-agricultural land for which applications are
pending with relevant authorities. Further, we are required to
renew certain of our existing approvals. While we believe we will
obtain approvals or renewals as may be required, there cannot be
any assurance that the relevant authorities will issue any such
approvals or renewals in the anticipated time frames or at all. Any
delay or failure to obtain the required approvals or renewals in
accordance with our project plans may adversely effect our ability
to implement our planned projects and adversely affect our business
and prospects. Further, some approvals and/or renewals for projects
under joint development have been obtained or applied for by our
joint development partners and/or owners of the land and such
approvals and/or renewals have not been transferred in our name. We
cannot assure you that our joint development partners will obtain
such approvals and/or renewals, in a timely manner, or at all.
Approximately 83 per cent of our total Land Reserves comprises land
for which we or our joint development partners have not yet
obtained a certificate for change of land use from agricultural
use. The procedure for obtaining a certificate for change of land
use varies from state to state. However, the procedure typically
followed includes the filing of an application (along with the
requisite documents) in a prescribed format with the relevant
authority for obtaining a change of land use
permission/certificate. Such application is considered by the
relevant authority on the basis of criteria established in the
relevant zoning regulations for the development of such land. A
decision is communicated by the relevant authority within a
prescribed period from the date of submission of the application.
The applicant is also required to pay fees for a certificate of
change of land use, which may vary from state to state. Moreover,
there can be no assurance that we or our joint development partners
will not encounter material difficulties in fulfilling any
conditions precedent to the approvals or renewals. For example, our
licenses in respect of certain group housing projects in Punjab
require us to construct residential units/develop plots for
economically weaker sections on specified area of land. The sale,
including the sale price, of such units/plots is to be determined
by the government. Further, we may not be able to adapt to new
laws, regulations or policies that may come into effect from time
to time with respect to the real estate industry in general or the
particular processes with respect to the granting of approvals. For
more information, see the section Government/Other Approvals
beginning on page 636 of this Draft Red Herring Prospectus. 16. The
government may exercise rights of compulsory purchase or eminent
domain in respect of our lands. Like other real estate development
companies in India, we are subject to the risk that central or
state governments in India may exercise rights of eminent domain,
or compulsory purchase in respect of lands. The Land Acquisition
Act, 1894 allows the central and state governments to exercise
rights of compulsory purchase, or eminent domain, which, if used in
respect of our land, could require us to relinquish land with
minimal compensation. The likelihood of such actions may increase
as the central and state governments seek to acquire land for the
development of infrastructure projects such as roads, airports and
railways. Any such action in respect of one or more of our major
current or proposed developments could adversely affect our
business. 17. We may not be successful in identifying suitable
projects both in terms of the type and location of our projects,
which may impede our growth.
xvii
Our ability to identify suitable projects is fundamental to our
business and involves certain risks, including identifying and
acquiring appropriate land or development rights over appropriate
land, appealing to the tastes of residential customers,
understanding and responding to the requirements of commercial
clients and anticipating the changing retail and hospitality trends
in India. In identifying new projects, we also need to take into
account land use regulations, the lands proximity to urban
infrastructure and civic amenities such as transport links, water
and electricity. We may not be successful in identifying suitable
projects that meet future market demand. The failure to identify
suitable projects, build or develop saleable or lettable properties
or meet customer demand in a timely manner could result in lost or
reduced profits. In addition, it could reduce the number of
projects we undertake and impede our growth. 18. Our Land Reserves
may be affected by a change in approved land use in urban master
plan areas. We believe that most of our Land Reserves are located
in government approved urban master plan areas and it has been and
will continue to be our policy to purchase land in such areas in
order to mitigate the risk that Land Reserves be recharacterised to
their original use. However, there remains the possibility that,
even in government approved urban master plan areas, designation
and characterisation of land as commercial, residential or
otherwise may change. If we are unable to use the land for the
development for which the land was purchased, we may be required to
modify, delay or abandon elements of that development or the
development project in its entirety, which could have an adverse
effect on the relevant project and as such our business. 19. We may
not be able to develop all of our Land Reserves. We have Land
Reserves in various regions across India. As of August 31, 2007,
these Land Reserves amounted to 12,544 acres with an aggregate
estimated Saleable Area of 542.0 million square feet of which over
17.0 million square feet is under development. For a detailed
description and tabular information of our Land Reserves, see Our
Business Description of our Business Land Reserves on page 66. Our
ability to develop our Land Reserves and generate the estimated
Developable Area is subject to a number of risks and contingencies,
some of which are summarized below: the title to the lands we own
may be defective or could be challenged; the MoUs and agreements to
purchase and/or develop land may expire, and we may not be able to
renew the agreements that have expired; we may not receive the
lands that are supposed to be allocated to us by government
authorities, whether as a result of political factors or otherwise;
and we may not receive the expected benefits of the sole or joint
development rights we have been granted.
Some of these risks are discussed in greater detail below. If
any of these risks materialize, we may not be able to develop our
Land Reserves and generate developed area in the manner we
currently contemplate, which could have a material adverse effect
on our business, results of operations and financial condition. 20.
The success of our residential property business is dependent on
our ability to anticipate and respond to consumer requirements. The
growing disposable income of Indias middle and upper income
classes, together with changes in lifestyle, has resulted in a
substantial change in the nature of their demands. Increasingly,
consumers are seeking better housing and better amenities such as
schools, retail areas, health clubs and parks in new residential
developments. In our residential business line our focus is on
developing integrated master planned communities in the mid to
luxury segment in which we design, build and sell a wide range of
properties including villas, townhouses and apartments of varying
sizes. By integrated master
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planned communities, we mean that we include healthcare,
developments that have one or more community facilities, including
hospitals, schools, retail and commercial buildings, enabling a
live, work and play theme within the same development. These sorts
of amenities have historically been uncommon in Indias residential
real estate market and if we fail to anticipate and respond to
consumer requirements, we could lose potential customers to
competitors, which in turn could adversely affect our business and
prospects. 21. The success of our retail strategy depends on our
ability to build malls in appropriate locations and attract
suitable retailers and customers. The success of our retail real
estate business depends on our ability to recognise and respond to
the changing trends in Indias retail sector and position ourselves
in attractive locations. We believe that in order to draw consumers
away from traditional shopping environments such as small local
retail stores or markets as well as from competing malls, we need
to create demand for our malls where customers can take advantage
of a variety of retail options and amenities. We also must secure
suitable anchor tenants and other retailers as they play a key role
in generating customer traffic. There can be no assurance, however,
that our anchor tenants will attract or draw potential customers to
enter into our malls. With the likely entry of major international
retail companies into India and the establishment of competing
retail operations, there will be an increasing need to attract and
retain major anchor tenants and other retailers who can
successfully compete with the growing presence of large
international retailers. A decline in retail spending or a decrease
in the popularity of the retailers businesses could cause retailers
to cease operations or experience significant financial
difficulties that in turn could harm our ability to continue to
attract successful retailers and visitors to our malls. 22. Our
plans to develop hotels are subject to a number of contingencies
and may not be successful. As part of our growth strategy, we
intend to use our existing real estate development capabilities to
build and own hotels. The success of this business is dependent on
our ability to select appropriate locations and to successfully
undertake projects with our strategic partners to profitably
operate the hotels. Our success in the development of hotels will
also depend on our ability to forecast and respond to demand in an
industry in which we have little or no experience to date. We have
entered into a joint venture relationship with Accor for the
development and operation of the Formule 1 brand of budget hotels
to India and a joint venture agreement with Premier Travel Inn in
relation to the development and operation of mid-market category
hotels. We have entered into an operating agreement and a
memorandum of understanding with Marriott Hotels India Private
Limited and a letter of intent with Four Seasons Hotels Limited to
develop, operate and manage hotels with them under certain Marriott
and Four Seasons brands. Our hotel business is reliant on
attracting further quality hotel operators and in the process
reliant on their performance to consistently deliver a well run,
well regarded establishment. We cannot assure you that these
ventures will be successful. In the event that these arrangements
with our strategic partners are not successful, our reputation as a
hospitality partner for future projects may be affected. If our
partners fail to meet their obligations or experience financial or
other difficulties or suffer a loss of reputation, our projects may
suffer and, as a result, our business and results of operations.
The hotel industry entails additional risks that are distinct from
those applicable to our businesses of developing residential,
commercial and retail properties, including the supply of hotel
rooms exceeding demand, the failure to attract and retain business
and leisure travellers as well as adverse international, national
or regional travel or security conditions. Any of these
developments could have an adverse effect on our business, results
of operations and financial condition. For further detail see Our
Business Leveraging our strategic relationships on page 5 of this
Draft Red Herring Prospectus. Risks relating generally to our
business 23. A decline in the financial condition of our
residential, commercial, retail and hotel customers as well as our
prospective tenants or customers may adversely affect our business
and financial results. General economic conditions may affect the
financial stability of our customers and prospective customers
and/or the demand for our residential, commercial, retail and
hospitality real estate. In the event of a default by a tenant
prior to the expiry of a lease, we will suffer a rental shortfall
and incur additional costs, including legal expenses, in
maintaining, insuring and re-letting the property. If we are
unable