New Delhi: Unitech Ltd, India’s second largest developer by market value, has raised $325 million, or Rs1,608 crore, through a sale of shares to so-called qualified institutional buyers, in an attempt to part-retire its short-term debt.
The sale, called a qualified institutional placement, or QIP, in financial circles, was done at Rs38.50 a share and will result in a 13% dilution of stake of the promoter Chandra family at Unitech to 51% from 64%, according to a person familiar with the development.
Around 90% of the 42.1 crore shares sold in the QIP were subscribed by foreign institutional investors and 10% by domestic investors, this person said, asking not to be named because the company had not yet released a statement scheduled for late evening. Some of the investors who subscribed to the issue included units of HSBC, Prudential, Sandstone Capital and Orient Global, the person added.
Debt-laden: Real estate developer Unitech’s corporate office in Gurgaon. Of the firm’s total exposure of Rs1,400 crore to mutual funds, some Rs900 crore was due on 19 January to less than 10 mutual funds. Ramesh Pathania / Mint
A QIP is a private placement of equity shares or securities convertible to equity by a listed company with qualified institutional buyers approved by the market regulator Securities and Exchange Board of India.
Unitech has been looking to raise funds through the QIP route since early last year. The realty firm’s total outstanding shares before the QIP was 162 crore, which rose to 204 crore shares after Thursday’s issue of fresh shares.
The person quoted earlier said debt equity ratio of the firm will reduce to 2.4 to 1.4 as a result of the statement and debt reduced to Rs8,900 crore.
The share sale was managed by a local unit of UBS AG and IDFC-SSKI Securities Ltd. UBS India’s chairperson and managing director Manisha Girotra described the share sale as a “reopening of India equity markets (and) the largest QIP in real estate” here.
An analyst predicted Unitech will use QIP proceeds to repay Rs500 crore debt it owes mutual funds and is due for repayment on 19 April or this coming Sunday. “Unitech is neck deep in debt,” an analyst with a domestic brokerage said, asking he not be identified. “Their total debt is around Rs10,000 crore out of which around Rs2,000 crore is due in the next financial year.”
Of Unitech’s total exposure of Rs1,400 crore to mutual funds, some Rs900 crore was due on 19 January to less than 10 mutual funds including Reliance Mutual Fund and Kotak Mutual Fund. On that day, a company spokesman told Mint that the firm had prepaid “a substantial part of the Rs900 crore to mutual funds on 17 January and the rest had been rolled over”.
That same day, Unitech shareholders approved a plan to raise long-term funds up to Rs5,000 crore through options such as sale of global depository receipts and QIP. Shareholders had also approved an increase in the firm’s authorized share capital to Rs1,000 crore from Rs500 crore. The amount would be raised through an issue of fresh equity, convertible debentures or other instruments.
This is Unitech’s second attempt at raising equity through a QIP. Unitech had initially planned a QIP in January 2008. The company had even taken shareholders’ approval for the issuance of 200 million shares to increase the paid-up share capital of the company then and was expected to raise $1.5 billion through this route in the first quarter of 2008. The plan was scrapped in March 2008 over market volatility.
Shares of Unitech closed at Rs43.35, 9.78% down on the Bombay Stock Exchange, whose benchmark index ended 2.99% weaker.