Unitech FY11 profit falls 16%, misses forecast

Unitech FY11 profit falls 16%, misses forecast

Mumbai: Unitech, India’s second-biggest listed real estate company, missed estimates with a 16% fall in annual net profit, but expects higher sales bookings during the current financial year as it expanded into some new towns.

Unitech shares fell in early trade, but reversed losses to rise 2.3% by 10.30 am in a Mumbai market up 0.14%.

Rapid urbanization and rising income levels are expected to boost demand for houses in Asia’s third-largest economy, but high inflation and rising interest rates are negatives for the sector in the near term.

The Reserve Bank of India (RBI) has been one of the most aggressive to tighten liquidity, raising rates nine times since March 2010, including a bigger-than-expected 50-basis-point increase this month.

Unitech, which also has a telecom joint venture with Norway’s Telenor , has been linked to a huge telecoms licensing scandal that has weighed on its shares this year.

“The realty space over all, the outlook is not too rosy for the foreseeable quarters," said Ambareesh Baliga, chief operating officer at Way2Wealth Securities.

“And when there is a double issue, why would one look at buying Unitech? There are other realty stocks if one wants to buy," Baliga said, referring to the ongoing investigation into the telecoms licensing scandal.

Unitech’s managing director, Sanjay Chandra, and the joint-venture firm Unitech Wireless are among 14 individuals and three companies charged by the Central Bureau of Investigation (CBI) of involvement in rigging the grant of telecom licences in 2007-08, which a state auditor said may have cost the government up to $39 billion.

Chandra has been held in jail, pending trial. All accused have denied any wrongdoing.

Baliga said Unitech shares were rising after underperforming the broader market and that “one should not read much" into it.

Unitech shares are down about 49% this year, compared with a 10.7% drop in the main index and a 26% fall in the sector index.

Profit Miss

Unitech, which builds houses as well as offices and other commercial real estate, said consolidated net profit fell to Rs568 crore ($125.7 million) for its fiscal year ended March from Rs675 crore a year earlier, on higher costs.

Net sales rose to Rs3,190 crore from Rs2,930 crore a year earlier.

Analysts on average had expected net profit of Rs718 crore on revenue of Rs3,110 crore, according to Thomson Reuters I/B/E/S.

Unitech said it achieved sales booking of Rs4,323 crore for the year ended March and has launched more than 6 million square feet since January this year across 16 projects.

It entered towns such as Ambala, Rewari and Dehradun in northern India apart from launching projects in its existing cities.

It did not report its fourth-quarter figures separately, but a Reuters calculation showed its net profit for the quarter ended March stood at Rs103 crore, 37% lower from year earlier, and lower than Rs189 crore analysts had expected.

Unitech’s larger rival DLF Ltd missed analysts’ estimates with a 19% fall in quarterly profit due to cost rises and warned the central bank’s actions to tighten liquidity will likely temper sector growth this fiscal year.