Mumbai: Delhi-based industrialist Arvind Dham, chairman and managing director of auto parts maker Amtek Auto Ltd, is leading the race to buy the hotel projects of Unitech Ltd after making an offer to pay up to Rs400 crore, said an investment banker familiar with the matter.
Bitter realty: Sanjay Chandra, managing director of Unitech, says the firm is in talks with various parties for selling some of its hotel assets. Harikrishna Katragadda / Mint
Unitech, India’s second largest publicly traded realty firm, is looking to sell these properties to repay short-term debts. Its consolidated debt at the end of the September quarter was about Rs8,000 crore, and short-term debt was about Rs2,700 crore, due in March.
The price Dham is offering is significantly below the valuation of these hotel projects quoted early this year, the banker said, declining to be named because he has business dealings with one of the firms.
Unitech, which builds and sells properties, does not gain significant rental income from its operations. The firm started developing properties about 20 years ago and gained from the rally in stock markets and real estate that kicked off in 2003. The company was highly leveraged for its aggressive growth in realty and for diversifying into telecom, financial services and hospitality.
However, the slump in India’s stock markets this year and tightened liquidity in the local financial system following the collapse of US investment bank Lehman Brothers Holdings Inc. has left Unitech struggling to refinance loans. The proposed sale of hotel properties is in line with its larger asset liquidation plan.
Sanjay Chandra, managing director of Unitech, said in an emailed reply to Mint that he could not comment on any names or specifics or the people in talks with it till the transactions are closed. “We are talking to various parties for selling some of our hotel assets... They include high net-worth individuals, corporate and hotel-owning companies.”
Santosh Singhi, chief financial officer of Amtek Auto, said he was unaware of any such move by Dham and could not comment on transactions involving the firm’s owner in his personal capacity. Dham is in London and will not be available for comment, he said.
Unitech is being advised by a Delhi-based law firm on its monetization of hotel assets. This law firm has also approached the Hinduja group, which owns truck maker Ashok Leyland Ltd and IndusInd Bank Ltd, besides real estate and other businesses.
Prabal Banerjee, chief financial officer of the Hinduja group, confirmed on the phone that his firm “has been approached by a reputed Delhi-based law firm on behalf of Unitech”. The Hinduja group, however, is yet to make a decision on whether to pitch for the hotel properties, he said. “We have not yet looked at it or taken a call.”
Banerjee also declined to name the law firm or talk about price expectations of the realty firm.
A report in The Telegraph on Tuesday had said the Hinduja group was set to buy a Gurgaon-based hotel property of Unitech for Rs226 crore. The Hinduja group also has a stake in Mumbai’s JW Marriott Hotel and has consolidated its realty assets under one entity, according to the report, which did not have comments from Hinduja group executives.
Unitech’s head of planning and strategy, R. Nagaraju, had in a November interview to Mint said his company expects to receive Rs300 crore by December as the first tranche of an about Rs800 crore cash infusion from Norwegian firm Telenor ASA, the new 60% owner in its startup telecom subsidiary, by December. He had also said Unitech was planning to monetize six hotel properties.
“India’s real estate companies are sacrificing growth to generate liquidity,” said analysts Kenny Lau and Adrian Chan, part of Asia equity research at Credit Suisse Group AG in a 4 December report entitled Liquidity Crunch in Asia.
Unitech shares closed at Rs33 on Tuesday, up 7.32% over Monday. Its market capitalization stands at Rs5,357.14 crore. Amtek Auto’s shares closed 3.34% lower at Rs18.80 on Tuesday, with a market capitalization of Rs210.86 crore. The stock has fallen 87.54% on the Bombay Stock Exchange since the beginning of the year while Unitech has fallen 93.27%.