Emaar MGF IPO: will you make a quick buck?

By Yogesh Chabria

When I was a kid, my parents would often send me to a kirana shop to buy the usual groceries. These trips taught me many things that I can put into practice today.

The shop from where I bought my gorceries offered me the best quality products at the most competitive prices and we were satisfied with it. But after some time a new shop sprung up just around the corner.

It offered pretty much the same products but with an attractive packaging. But the prices were higher compared to our preferred shop. So, I did not buy from there. 

The reason: I was getting something cheaper and better, already. It also did not make sense to take extra risk and pay more for products, which did not have a track record. Nothing revolutionary was being offered to me, period.

Now, maybe if the new shop offered a trial period, we would have been able to judge whether it was worth it. 

Being lured by not-so-important factors, may lead you to a bad deal. I apply the same logic when investing in an Initial Public Offering (IPO). So, before taking the plunge, have reasons strong enough to convince yourself of its worthiness.

New IPO on the block: Emaar MGF IPO
For retail investors, an IPO is more often than not, a route to making fast money. Their simple strategy: invest in an IPO, then make an exit once the share price scales up when it gets listed on the stock exchange.

But in the recent past, several IPOs have fallen below their issue price within a few weeks. This only reinforces that IPOs are not money making machines. You need to tread carefully.

The latest IPO on offer is Emaar MGF. I have been going through its 800-page red herring prospectus. What comes to my mind is: how many investors actually read this lengthy document?

It is not just a time-consuming act, but many even find it boring. But I feel there's always a simpler way to understand complicated things. Here, I try to do just that.

What's on offer?
Emaar MGF is a joint venture between Emaar Properties PJSC (Dubai) and MGF Development Ltd (Delhi). With this IPO, the company plans to raise over Rs 6,000 crore, which will be used to acquire more land, repay loans and undertake developmental and construction expenditure.

The company does have a respectable brand, as Emaar has done quite a few world-class projects and is trying to establish a brand name in India as well.

The company benefits from global alliances though. To date back, the company started only in the year 2005.

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Yogesh Chabria, investor and author, uses the principles of Happionaire investing to invest in a fun, simple and interesting way. He believes in empowering retail investors with knowledge and helping them create wealth. You can find out a bit about it in his soon to be launched book Invest the Happionaire™ Way-Let's Get Started. Check out the book's brand new blog at www.blog.happionaire.com < http://www.blog.happionaire.com/ >