Emaar Properties' plans to sell off a stake in its Indian business to Adani Group could increase investor confidence in the embattled Ahmedabad conglomerate as it continues its recovery from an accounting scandal, according to analysts.
Emaar – the builder of Burj Khalifa, the world's tallest tower – this week said in a filing to the Dubai Financial Market that Adani Group was among a “few groups” of Indian companies with whom it is discussing the potential sale of a stake in Emaar India. The size of the stake, its valuation and other terms of a sale have yet to be finalised, the developer said at the time.
Adani Group has been fighting a firestorm triggered by a January 2023 report from Hindenburg Research, which accused the Indian conglomerate of stock manipulation and improper use of offshore tax havens, as well as raising concerns about its high level of debt.
Although Adani Group, based in Ahmedabad, denied all allegations, it could not prevent billions from being wiped off its value. It has since recovered, claiming its financial status remained unaffected and has “rebounded strongly”.
Any stake purchase from Dubai-based Emaar, which reportedly would be Adani Group's biggest transaction in the real estate industry, is then further proof of its resurgence, said Vijay Valecha, chief financial officer of Dubai-based Century Financial.
Media reports have suggested that Adani Group may take an ownership stake of between 70 per cent and 100 per cent in Emaar India, for up to 50 billion rupees ($578 million). Emaar and Adani Group have not commented on these reports.
In any case, for Adani “this could be a massive opportunity to expand its real estate business, which might be lagging compared to its other major business verticals”, Mr Valecha told The National.
“Inking a deal with the developers of the Burj Khalifa could significantly help in rebuilding the image of the Adani Group. Investors and consumers could see this deal as a significant view of confidence from Emaar to pick Adani as the potential buyer for its local stake, boosting investor confidence worldwide.”
That would strengthen and consolidate Adani Group's real estate portfolio in India. Adani Realty already has residential projects in key cities such as Ahmedabad, Mumbai, Gurugram and Pune. Emaar began operations in South Asia's largest economy in 2005 and is present in Gurugram, Mohali, Lucknow, Jaipur and Indore.
“This deal could bolster Adani’s real estate portfolio in tier-2 cities, along with getting access to [the] top construction quality Emaar is known for,” Mr Valecha said. “This could poise Adani Realty for greater growth, especially after it recently won the tender for the redevelopment of India’s largest slum area, Dharavi, in Mumbai.”
For Emaar, it will be an opportunity to streamline its operations, refocus on its core markets and optimise the allocation of its capital, said Ray Verma, a broker at Dubai-based Eden Realty.
“Emaar has a strong presence in the UAE and other key international markets, and divesting its Indian operations could enable the company to channel resources into areas with higher growth potential and operational efficiencies,” he told The National.
“While this would provide Emaar with additional liquidity and reduced exposure to India's evolving real estate landscape, it might also lead to a diminished foothold in a market with significant long-term growth potential.”
Emaar Properties has been experiencing strong growth, driven by Dubai’s property boom. Its latest quarterly report showed a 30 per cent growth in revenue to Dh23.8 billion ($6.48 billion) for the first nine months of 2024.
Of that, Emaar’s international operations posted a revenue of Dh1.6 billion, primarily through its operations in Egypt and India, and representing around 7 per cent of Emaar’s total revenue, down from 11 per cent in the same period in 2023.
That “might not be a significant share, especially considering the figures from a year ago”, Mr Valecha said. “This indicates the slowing growth of Emaar’s international portfolio and could be a reason for selling its stake in India.”
Hindenburg's announcement on Thursday that it was shutting down may have helped Adani Group, causing its top stocks to jump as much as 5 per cent.
“The closure effectively removes a major source of market pressure, potentially strengthening Adani's position and investor confidence further,” Mr Verma said.
