Mumbai / New Delhi: Unitech Ltd, the troubled real estate firm, is reassuring the Street that it can meet its Rs2,700 crore debt obligations that are due by March without a major fresh inflow of new funds or recasting loans.
The plans of India’s second largest publicly traded real estate company, which has seen its shares fall 92% since January, along with most of its peers, are, however, based on market sentiments not worsening and thus allowing the company to sell stakes in some of its hotel, retail and office projects to private equity and rich investors, according to Unitech head of planning and strategy R. Nagaraju.
Unitech’s consolidated outstanding debt—about Rs8,000 crore as in September including outstanding payments on land acquisitions—will come down as Rs1,200 crore loans in a telecom start-up unit of the realty firm gets taken over by Telenor ASA, the phone firm’s new 60% owner, Nagaraju said in a phone interview on Thursday.
Of the Rs8,000 crore, about Rs1,300 crore was lent by mutual funds, with the rest due to banks, he added.
Unitech’s current net gearing, or net debt to equity, is about 1.8. “Once the equity infusion happens into our telecom subsidiary, net gearing will come down to about one. It could reduce further once the cash flows come in from the monetization transactions that are currently in process,” maintained Nagaraju.
Unitech has about Rs1,600 crore cash in hand, which it plans to use to complete ongoing construction projects. The company expects to receive Rs300 crore, the first tranche of its Rs800 crore cash infusion from Telenor, by December. That amount will go up to Rs800 crore next fiscal year as the Norwegian firm infuses more cash into Unitech Wireless Ltd, the phone services start-up, and returns shareholder loans to Unitech.
Separately, Unitech expects upwards of Rs600 crore through the sale of its Saket property in south Delhi.
Six hotel properties, which it plans to part-monetize, are valued at around Rs2,000 crore, Nagaraju claimed.
The firm has already received expression of interest from a few potential investors for acquisition of some of its hotel assets, he added.
The firm will not sell more equity, raise fresh loans against or sell its remaining 40% equity stake in Unitech Wireless, which was valued at about Rs4,000 crore, following the Telenor deal. “We will not touch the (stake in) telecom company,” Nagaraju insisted.
According to the deal struck with Telenor, Unitech can further sell up to 49% of its remaining 40% stake in Unitech Wireless, a person familiar with the transaction told Mint.
The chances of Telenor pulling out of the proposed deal are “zero”, he insisted.
A Telenor spokesman said there was no question of not going ahead with the deal as speculated in media reports. “Telenor is fully committed to the investment in India. We have also seen the articles, but let me assure you that we are fully committed,” Pal Kvalheim told Mint on email.
Early November, Unitech had raised loans from a public sector bank to meet some of its needs at 16% interest rate, said Nagaraju, declining to name the lender. The firm recently raised around Rs200 crore to pay back the 45-day debt taken from Indiabulls Financial Services that had a deadline of 17 November. Nagaraju denied persistent rumours that Unitech had actually taken a loan of about Rs180 crore at 40% interest rate in order to repay Indiabulls, which had Unitech shares as collateral.
According to analysts who track the company, Unitech has paid down about Rs1,500 crore debt, which had matured during the first and second quarter of this financial year, and is currently capable of meeting around Rs1,000 crore interest due this fiscal year.
In a 10 November report, BNP Paribas wrote: “The company’s interest coverage ratio (Ebitda/gross interest) remains dangerously high at 2.2x declining to 1.9x by FY10.”
Shares of Unitech closed on the Bombay Stock Exchange at Rs35.15 a share, down 9.87%. The company is now valued at around Rs5,700 crore, about half the value of its telecommunications start-up.
“We have around 30 (or so) properties under the hotel, retail and office segment under development right now,” Nagaraju said. “Even if we dilute stake in five-six properties out of the 30 (or so) properties that we have, we will be able to meet our loan obligations.”