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Telenor drops rights issue; to buy Unitech with cash, debt

Telenor drops rights issue; to buy Unitech with cash, debt
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First Published: Wed, Jan 28 2009. 12 44 AM IST

No rights issue: A file photo of Unitech managing director Sanjay Chandra (left) with Telenor’s Asia chief Sigve Brekke. Harikrishna Katragadda / Mint
No rights issue: A file photo of Unitech managing director Sanjay Chandra (left) with Telenor’s Asia chief Sigve Brekke. Harikrishna Katragadda / Mint
Updated: Wed, Jan 28 2009. 12 44 AM IST
New Delhi: Norwegian phone firm Telenor ASA, which is buying a 60% stake in the mobile phone services unit of Unitech Ltd, India’s second most valuable real estate company, has withdrawn a plan to raise $1.8 billion (about Rs8,800 crore) through a rights offer, deciding to fund the purchase instead with debt and cash reserves.
Unitech Wireless Ltd now expects the first instalment of about Rs1,250 crore from Telenor to come in by early February and not by end-January. The deal is structured in six tranches.
No rights issue: A file photo of Unitech managing director Sanjay Chandra (left) with Telenor’s Asia chief Sigve Brekke. Harikrishna Katragadda / Mint
Telenor will not pay dividend to shareholders for 2008 and could do the same for 2009, the company said in a statement. “A final decision on dividend proposal for 2009 will be made after closing of the financial accounts for 2009,” the firm said, adding it has signed up a three-year loan for $1.19 billion “which may be used to finance the investment in Unitech Wireless”. The Norwegian firm expects the transaction to close first quarter in 2009.
Once the first instalment comes in, Unitech Wireless will repay Rs350 crore of shareholder debt to Unitech, said R. Nagaraju, the company’s general manager, corporate planning and strategy.
The realty firm has invested nearly Rs2,000 crore in its telecom unit, of which about Rs1,200 crore is by way of loans from banks. Unitech had also lent Rs770 crore to Unitech Wireless.
Unitech, which had a consolidated debt of around Rs8,000 crore, needs to repay around Rs2,500 crore by March. On 19 January, after the company’s extra-ordinary general meeting, Unitech said it has reduced that March obligation to Rs600 crore from Rs2,500 crore, by restructuring Rs1,000 crore bank loans and repaying in part Rs900 crore to mutual funds. The company plans to repay Rs600 crore further through sale of assets and internal accruals. It has put on the block a hotel property in Gurgaon and an office building in Saket, New Delhi.
“Cash flow for Unitech is pretty tight right now since they still have debt repayment obligations of about Rs600 crore,” said an analyst with an international brokerage firm, who did not want to be identified. “So, if the money comes in soon, it will give a breather to Unitech.”
“Their Gurgaon and Saket properties will generate about Rs700 crore. So, we don’t think a possible delay in the first instalment will have an impact on their debt obligation,” said an analyst with the local unit of other overseas brokerage on the impact of the delayed inflow from Telenor, who also refused to be identified. “We expect the Telenor money to come by March and this will give some relief to Unitech in fiscal 2010.”
Unitech, whose shares closed 1.11% up at Rs27.25, on a day the Bombay Stock Exchange’s benchmark index gained 3.8%, is to declare its December quarter results on 31 January.
An analyst tracking Telenor said it was bad news for investors that the firm had decided not to pay dividend but the India focus remained intact. “As far as the additional debt goes, there are other stocks in the sector that are leveraged to about 2.5 times while Telenor is just over two,” David George, an analyst with Credit Suisse said on phone from London.
Shares of Telenor jumped 2.3% to 47.55 Norwegian kroner in midday trade on the Oslo exchange.
shabana.h@livemint.com
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First Published: Wed, Jan 28 2009. 12 44 AM IST