New Delhi: Real estate developer Unitech Ltd plans to spin off Unitech Infra— its infrastructure and telecom arm— into a separate firm. Unitech will hold 35% of Unitech Infra after the so-called demerger. Unitech Infra will run businesses including telecom, special economic zones, information technology parks, hotels, construction and amusement parks. Unitech managing director Sanjay Chandra said in an interview that Unitech Infra may be listed by year-end. Edited excerpts:
How much of Unitech debt would be transferred to the new entity?
Changing structure: Unitech managing director Sanjay Chandra. Harikrishna Katragadda/Mint
None of the Unitech direct debt would transfer on. But debt, which is pertaining to the infrastructure projects and particular SPVs (special purpose vehicles), which is currently about Rs350 crore, will transfer on to the new company’s balance sheet...
Can you explain what you have given as a per-share value both on your construction side and for your corporate parks?
I don’t think we have given a value break-up. It’s quite a simple split where we have not valued each asset separately... So that way the market will have to determine the value, which they want to ascribe to it. But just to give you a perspective, the book value of this company is estimated to be close to about Rs5,000 crore.
Is it part of the plan that eventually you will sell your 32.5% stake in the telecom venture, whether to Telenor (Group of Norway, the overseas partner) or to any other party, and plough the proceeds back into the core infrastructure business, which is the platform you are trying to create?
There is no current plan to do so. I think we would be fairly patient for the next three-five years and see the business plan objectives of our combined Telenor venture achieved and then I think there would be significant value. At that time, depending on the environment, the market conditions, the opportunities, we will take a call.
Let us talk about the residual business for a bit then. How do you value what remains now in Unitech? How much will these non-core businesses be contributing at the Ebit (earnings before interest and tax) level for you?
The first nine months, as of 31 December, the management estimates of this demerged entity was a top-line of about Rs350 crore and a PAT (profit after tax) of about Rs55 crore. So that would be the reduction on the Unitech balance sheet, approximately.
How do you monetize the infrastructure assets—do you look at a JV (joint venture) partner or do you have some other plans?
I think we are pretty open. It could be either JV partners at project levels where we could exit those ways or eventually, I think there would be possiblypension funds, international REIT (real estate investment trust) like products which we would be able to do to monetize those longer-term cash flows, which we generate from the infrastructure assets. So I think it’s early in the game; right now we have enough capacities to take on leverage and grow the business.
What is the eventual cash generation plan for the demerged business?
...this business will be actually investing a lot over the next few years, so whatever we generate from monetizing assets—which could be Rs1,400- 1,500 crore a year—would go into longer-term investment in infrastructure projects.
You are still left with Rs6,300 crore gross debt on Unitech’s book, what is the plan in terms of a scale down by FY11?
On Unitech, on a net level, our debt is a little over Rs5,000 crore and with the internal cash flows, which we are generating, if we do not invest in further land acquisition, we could be debt-free in less than two years... I don’t think we will end up spending too much on land acquisition. So we will actually be in a situation where our debt-equity ratios could come down drastically over the next two years or they would be negligible debt.
Any timeline for Unitech Infra’s listing?
I think typical demerger and listing processes like this have taken in the past, by other companies, anywhere from four-six months, so we feel ours should also be within that time frame. So I think definitely before the end of the year, this could be a separately listed company.