New Delhi / Mumbai: Unitech Ltd, India’s No. 2 listed property developer, has got commitment to raise about $575 million from institutions in its second round of share sale in as many months, three sources said on Monday.

Unitech, which has been hit by high debt, sluggish demand and a crash in property prices, will use the proceeds to repay part of the debt, one source with direct knowledge of the development said.

The New Delhi-based company will be selling more than 340 million shares at Rs81 each, said the banking and company sources, who did not want to be named as they were not authorised to speak to media.

Shares in Unitech, which have a market value of $3.5 billion, gained 5.1% to Rs86.60 at 0842 GMT in a Mumbai market that was up 0.9%.

About 40 institutions including billionaire investor George Soros, Prudential, Nomura and DE Shaw have agreed to subscribe to newly issued shares, one source said.

“The appetite surprised us,” said one banking source, referring to more than double the price investors were willing to pay, compared with a sale just over two months ago.

In April, the company had raised Rs16.2 billion ($335 million) by selling 420 million shares to institutional investors at Rs38.50 each.

“Some formalities are yet to be completed. The money will come in July,” said another source.

The share sale would dilute the holding of Unitech’s founders to about 43% from 51% currently, but a pending convertible warrants issue would again prop it up to more than 48%, one source said.

Unitech got shareholder approval on 16 June for selling up to 1 billion shares to investors, including a qualified institutional placement.

The shareholders also approved issuing 227.5 million convertible warrants to one of its founder group firms, which would inject Rs11.5 billion into the company over the next 18 months.

Cutting Debt

Unitech said last week it had net debt of Rs90.56 billion at the of end of March.

Managing director Sanjay Chandra had earlier said the company had rescheduled most of the debt and repayed part of it but did not details.

One source said Unitech’s current net debt stood at Rs78 billion and would get reduced to 50 billion by July as the proceeds from the share sale flow in.

Unitech had also received Rs10 billion from asset sales such as hotels and an office property since the fiscal year began in April, Chandra said in mid-June.

Unitech, which last week reported a 28% fall in annual profit for the year ended March, has said its new mass-housing projects are doing well and it aims to sell 20 million square feet of space during the year to March 2010.