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Sat 9 Feb 2008 12:30 PM

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Emaar pulls India IPO as market plummets

Emaar MGF abandons listing after cutting price twice and extending IPO by three days.

Emaar MGF withdrew its initial public offering (IPO) on Friday, becoming the second Indian company in 24 hours to abandon an IPO and adding more gloom to a market that has fallen 17% in a month.

The Indian joint venture of Dubai's Emaar Properties, which aimed to raise up to $1.64 billion, pulled out after cutting its price twice and extending its IPO by three days to February 11 in a volatile market.

"The company decided to take this step as a result of the prevailing adverse market sentiments, fuelled by renewed indications of a US recession and global meltdown," it said in a statement.

Similar concerns have caused many companies in Asia to withdraw IPOs.

Twenty-one IPOs worldwide, worth a combined $6.3 billion, were pulled in January due to volatile markets, according to Thomson Financial.

But India bucked the trend when its biggest ever offer, a $3 billion IPO from Reliance Power, was sold in a minute last month and subscribed 73 times before it closed.

The price range of the 10.4% stake in Emaar MGF being offered was initially set at 610-690 rupees ($15.5-$17.5) before first being cut to 540-630 rupees then trimmed again to 530-630 rupees.

Emaar's withdrawal follows Thursday's decision by healthcare services provider Wockhardt Hospitals to cancel its IPO after it received subscriptions for only one fifth of the offering.

Vallabh Bhanshali, chairman of Enam Securities, a global coordinator for the Emaar MGF issue, told a television channel there was a good chance the IPO would have been fully subscribed.

"We thought it best that the issue was withdrawn even if there was a very good prospect of seeing the issue through," he said.

Emaar MGF said it was worried how the stock would trade after listing but would return to the market in better days.

Bhanshali said two failed IPOs did not signal total gloom.

"I would not like to conclude that the world has gone one way because a couple of issues have had to withdraw," he said.

But analysts said the damage to market sentiment was severe and this augured ill for other IPOs.

Indian companies had plans to raise about $16 billion from new listings this year, almost twice as much as last year's record, according to Thomson Financial, but analysts and brokers say sentiment has deteriorated significantly in recent days.

"Any IPO withdrawal is bad for the market and the sentiment. It is definitely bad news for other issues," said Gajendra Nagpal, CEO of Unicon Financial.

But Nagpal also saw a silver lining as companies were more likely to price future issues more moderately.

"Bankers will be forced to think that they can't get away with any kind of pricing," he said.

Neeraj Dewan, a director at Quantum Securities, said the fate of Wockhardt Hospitals and Emaar MGF was a lesson for other firms planning to list.

"I hope the companies planning IPOs will take a cue from it. You just cannot price your IPO at the highest price and at the similar valuation your listed peer is trading at," he said.

"These are not bad companies. But the pricing was a bit aggressive when the markets are down, when people are shaken out."

Emaar MGF was being advised by Enam Securities and DSP Merrill Lynch, which are the global coordinators.

Citigroup Global Markets India, Kotak Mahindra Capital, HSBC Securities and Capital Markets (India), JPMorgan India, Goldman Sachs (India) Securities and ICICI Securities were also advisers to the issue. (Reuters)

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