India was regarded as a big growth market for Emaar Properties as it diversified away from Dubai. Instead, the developer's India subsidiary continues to drag on its performance.
Shares in Emaar dropped 0.7 per cent yesterday to Dh3.07 after Emaar MGF, its joint venture in India, reported a 2 billion rupees loss for its fiscal year.
The loss included a 1.1bn rupees write-off on the sale last year of an investment in a Kolkata hotel project. Total revenue declined 1.2 per cent from 10.6 million rupees last year to 10.5m in the fiscal year that ended on March 31. That may not be so bad, but the company also reported a 23 per cent increase in expenditure, from 8.09bn rupees to 10.02bn rupees, including a 17 per cent increase in cost of sales. Last year the company posted profits of 738m rupees as it handed over new homes in Dehli, Punjab and other cities.
Emaar MGF was launched in 2005 as a joint venture between Emaar and MGF Development, a specialist in developing retail projects in India. The company's goal was to focus on high-end master-planned residential communities such as those Emaar developed in Dubai, usually built around golf courses.
"It's definitely an important entry point into the Indian market" for Emaar, said Chet Riley, an analyst with Nomura Securities.
Emaar valued its investment in Emaar MGF at Dh3bn in its most recent filing. But the enterprise has encountered several obstacles, including a dispute with the Indian government over delays and alleged construction defects at the athletes' village during last year's Commonwealth Games.
Emaar MGF has filed papers proposing an initial public offering (IPO) three times but has yet to move forward, in part because Indian investors have been wary of property company valuations.
Emaar MGF expects to release more than 8,000 homes in the next two years, which might help to boost the bottom line and make the company more attractive for an IPO.