New Delhi: The net debt of the country’s No. 2 listed realty firm, Unitech Ltd will come down to Rs5,000 crore by the first week of July, following an infusion of Rs2,800 crore into the company last week through a private placement of shares, people familiar with the development said.
Better cash flow: Unitech has been raising funds from the beginning of this year to improve cash flow and reduce the company’s huge debt. Madhu Kapparath / Mint
At present, the gross debt of Unitech is Rs7,800 crore, they said.
After a qualified institutional placement (QIP), the company’s debt-equity ratio would come down to 0.52:1, among the lowest in the industry, and the net worth would be about Rs9,600 crore.
With this equity raising, all debt-related issues would be addressed and the focus now would be to build on the sales momentum created over the past three months, during which Unitech sold at least 3,000 flats comprising 4.5 million sq. ft, they added.
Unitech has been raising funds from the beginning of this year to improve the cash flow of the company and reduce its huge debt, which surged to nearly Rs11,000 crore by the end of 2008.
Since April, the company has raised nearly Rs4,500 crore through two rounds of QIP. Besides, it has garnered Rs1,000 crore through the sale of two hotels in Gurgaon and an office complex in Delhi.
Unitech raised Rs1,621 crore in the second half of April through the QIP route at Rs38.50 per share.
Last week, the company launched the second QIP at Rs81 per share to raise about Rs2,800 crore. The company was initially planning to raise Rs1,300 crore but after looking at the robust response from private equity players, it decided to raise about Rs2,800 crore.
People close to the development said Unitech received demand worth at least $1 billion (Rs4,850 crore) for its QIP, mainly from foreign institutional investors.
Apart from reducing the debt, Unitech would utilize the funds raised to develop projects to generate cash flow, which in turn would be used to service the debt, these people said.
The company had last month announced it would spend Rs1,700 crore to construct 20,000 affordable houses to become India’s top realty company within a year. It is aiming to sell 15,000 flats in the current fiscal year.
Unitech will develop affordable houses across the country with an average price of Rs15 lakh. It will construct such houses, whose average construction cost is estimated at about Rs1,000 per sq. ft, on a total area of 16-17 million sq. ft. The company possesses the land to develop these projects and the construction cost would be met largely through advances from customers.
Currently, Unitech has a land bank of about 8,000 acres.