New Delhi-based realty firm Unitech Ltd has no fund-raising plans lined up for the medium term. It has managed to reduce debt drastically, thanks to asset sales and two successful qualified institituional placements (QIPs), and expects internal accruals to help it continue on this path. Managing director Sanjay Chandra said in an interview that once debt comes down to manageable levels, the company may even look at acquisitions to fuel growth. Edited excerpts:

Reducing debt: Unitech managing director Sanjay Chandra. Harikrishna Katragadda / Mint

How is the operational cash flow situation?

We are very comfortable. In terms of the ratios, we would be possibly the best in the industry now. We were able to raise about $900 million (around Rs4,212 crore) between the two QIPs which we did. But more than that, we were able to repackage our product portfolio and monetise a lot of our land bank into projects that were more salable in today’s environment.

So we were able to book, at last count, over 12 million sq. ft of new projects. All that also led to cash flows and boosted investor confidence as well as lender confidence. We were able to bring down our debt from a peak of about Rs11,000 crore to about Rs5,000 crore. We were also able to launch a lot more new projects and move with the times.

What debt levels would you be comfortable with?

The leverage ratio which we have is 1:0.5, which is very comfortable. We would continue to deleverage from our operational cash flows. That will be relatively comfortable and will give us room to look at acquisitions of other property assets as and when they become available.

Are you looking at raising more funds?

We don’t have any plans for fund-raising currently in the mid-term; at least, not for the next several months.

Would you like to take the external commercial borrowing (ECB) route via a foreign currency convertible bond (FCCB) issue? You are lobbying with the government to do away with the three-year lock-in period. Where do things stand?

We have not seen any movement from the government on that side. Before our QIP, we were looking at a GDR (global depository receipt) or FCCB issuance and there were plenty of investors willing to back us at that time, when the capital markets were really not open.

The hitch was there was no precedence of these transactions in real estate. So we were not allowed to use these instruments, and that’s when we wrote to the departments. Nothing happened, and in the meantime, we raised enough capital. We have dropped these plans, but we believe that these avenues should be available to the industry.

Two years ago, we saw a rush towards the alternative investment market (AIM). Now there seems to be a move towards the Singapore Real Estate Investment Trusts (REIT) market. Is that something you are exploring?

I think it is early right now for the Singapore REIT market. The yields have tightened over there. So people feel they will possibly open up. But we are not looking at anything immediately, though our AIM market vehicle would be looking for an exit over the next couple of years. We have a seven-year horizon and we have just passed two years. So we have a long time to wait.

We would want to be in a market which is open and tested. We have been to the AIM market, and we saw because of the lack of liquidity the stocks don’t perform well in markets that are sometimes outside of the home markets.

What are your plans for Mumbai?

Mumbai is going to be one of our most significant markets after NCR (national capital region). What we believe and what we are seeing is the volumes of real estate transactions are actually in these two markets.

What are the margin expectations for Mumbai?

Mumbai would be in excess of 50% margins. The main thing about Mumbai is the absorptions that we are seeing are very fast. Whatever we have been able to bring to the market has sold faster than we expected. Over the next six to eight months, you will see a slew of launches by us in Mumbai, and a lot more visibility on construction over there.

What kind of revenue kicker will Mumbai actually provide for you?

In two years from now, at least 40% of our revenues. But this year, it is less than 5%.

You are on track to deliver 40%?

Yes, we are definitely on track.

This has got to be the worst year for telecom. Don’t you think it’s the wrong time for you to be making a foray?

It was not a surprise for us that a price war would start.

But are we not at pretty much the bottom in terms of pricing?

If you look at the incumbents’ profit margins, they are still in excess of 40%. So, as profits come down, market caps do get affected. We did not incorporate 40% margins in our business plan.

What did you incorporate?

We can’t talk about that. But we have built our business plan on a 10-15-year horizon. In the next one or two years, there will be price pressure in the market.