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09′ seems to be a complete reversal of the recession-hit 08′. Atleast for real estate companies. With them planning to raise about Rs. 13,000 Crore ($ 2.72 Billion), the recession seems to be another chapter in history. Or is it? Investor confidence is not predictable, and only time will tell whether the markets are truly recovering. However, the markets seem to spell a rollicking time for law firms. Bar & Bench takes a quick peek at their innings during the September 30 rush.
After the lows in 2008 and the first half of 2009, real estate companies have now, aggressively hit the street for funds, keeping the capital markets teams in law firms busy. The capital markets teams have been working day and night with lawyers angsting out on social networks with status messages reading “Just one more day before the madness end“, “finally the madness ends“, “I hope September 30 does not come in a long time“, etc. “I can assure you, our capital markets teams at Delhi and Mumbai have not gone home in a while. The September rush required all hands on the deck”, said Madhurima Mukherjee, Partner at Luthra & Luthra, New Delhi.
In 2007, developers raised about 42.7 per cent of the funds received for their businesses through IPOs. Of the Rs. 34,119 crore ($ 7.1 Billion) raised in 2007, Rs 14,591 crore ($ 3.03 Billion) was channeled to various real estate companies. This aggression cooled down in 2008 with almost all the real estate companies failing to attract investor interest because of stock market meltdown, sub-prime and changes in the monitory policy.
Starting with the Unitech’s Qualified Institutional Placement (QIP) in the first part of this year, close to fifteen real estate companies are trying to raise money in more than one way. The September 30 audit deadline has created a rush for companies to file their draft red herring prospectus (DHRP) and QIP offer documents. Any delay beyond this date, will require the companies to have their books audited again, which may delay the whole process since audited balance sheets are valid for a period of six months. The last audited balance sheets will date March 31, which is the financial year end.
Lodha, Emaar, Ambience, DB Realty, Sahara Prime and Vascon Engineering have filed their DHRP to escape from the fresh audit requirement. Parsvnath, which is already listed, is choosing the QIP route to tap funds for growth. Amarchand is the one of the largest beneficiaries of this improved market sentiment, advising the issue on 5 of 7 transactions.
Emaar MGF- S&R, Dua and Linklaters
Emaar MGF, a joint venture between Dubai-based Emaar and Delhi-based MGF is trying to raise Rs. 3,840 Crore ($ 800 Million). Emaar is advised by Sandip Bhagat of S&R Associates, New Delhi. The underwriters are being advised by a team of Partners from Dua Associates. Manav Nagaraj, Partner at the Bangalore office along with Kamal Budhiraja and Jaspreet Sarin from Dua’s Delhi office are advising the underwriters on the domestic legal issues. Linklaters are the counsels on the foreign law.
Last year, Emaar had filed for an IPO which was extended, but still failed to generate investor interest. Although the advisors remain the same, the IPO does not feature Jones Day. Linklaters, which has a strong relationship with Emaar, had advised this IPO out of their Dubai office last year, while Arun Balasubramanian, the head of the India Practice Group at the Singapore office takes the lead this time around.
Ambience – Amarchand, AZB and Dorsey & Whitney
Ambience is the other company that filed its offer documents yesterday. The Delhi based developer, promoted primarily by the Gehlot family has a debt of Rs. 2,500 crore ($ 523 Million). In an interview to CNBC-TV 18, CMD, Raj Singh Gehlot informed that of the IPO proceeds, Rs. 475 crore ($ 100 Million) will be set aside for clearing a part of the debt. The company intends to raise Rs. 1,125 crore ($ 235 Million), and is offering an additional Rs. 168.75 crore ($ 35.3 Million) worth of shares through a Green Shoe Option. Amarchand’s New Delhi office is advising the company, with AZB, New Delhi donning the role of the domestic counsel for the underwriters. Dorsey & Whitney’s London offices are the international counsel to the underwriters.
DB Realty – Luthra, AZB and Jones Day
DB Realty is hitting the markets with 1500 crore ($ 312.5 Million) IPO. DB Realty is being advised by Madhurima Mukherjee of Luthra & Luthra along with Senior Associates, Manan Lahoty and Nayana Jhawar and associates Vishal Yaduvanshi, Raghavendra Singh and Surya Bala. AZB & Partners are advising the underwriters on domestic legal issue while Jones Day is the foreign legal counsel.
Sahara Prime – Luthra and Milbank Tweed
Sahara Prime City, the promoters of Amby Valley and other prominent real estate developments have filed an IPO to raise about 3,450 crore ( $718 Million). Sahara Prime City claims to own about 8,500 Acres of land in various parts of the country. Amarchand is acting as the advisors for the Company while Luthra and the London office of Milbank Tweed Hadley McCloy are acting for the underwriters. Amby Valley is not a part of Sahara Prime City which is filing for IPO.
Vascon Engineers – Amarchand, Hariani and Jones Day
The Mumbai based Vascon Engineers Limited is another company trying to raise an IPO for the second time. The company proposes to raise Rs. 400 crore ($ 83.3 Million) this time. Vascon, a construction company, had initially in November 2007 planned and later, withdrawn an IPO. AZB were the Company Counsels in 2007, but were dropped in the 2009 IPO.
Interestingly, the Mumbai based company is advised by Amarchand’s Bangalore office. The Lead Managers are advised by Jones Day’s Singapore offices. Siddharth Kanakia from the Mumbai based Hariani & Co., is advising the issue on land summarization matters. Ameet Hariani, the founder partner of Hariani & Co., has close ties with Vascon and is a non-executive director in the Company.
Parsvnath QIP – Amarchand, Clifford Chance
Parsvnath is raising Rs. 168 crores ($ 35 Million) through qualified institutional placement (QIP). Amarchand is advising the company on the QIP procedure while the Singapore office of Clifford Chance is advising the under writers.
A total of Rs. 13,105 crores ($2.7 Billion) is being planned to be raised by the real estate companies through IPO’s ending on September 30. Most of the Companies that raised money in 2007 are trading less than 50% of the peak value.
The next couple of weeks are critical for these transactions. “The markets have bounced back beautifully and our firm has seen a lot more work this year than we did in 2007 or 08′”, says Madhurima Mukherjee. Only time will tell whether the lawyers can close these capital market transactions, or will have to keep it pending for investors to buy them at a later date.