Unitech seeks nod for $1b GDRs

Unitech seeks nod for $1b GDRs

Economic Times, page 8

Promoter Stake Drops 7% to 67.4% in Three Months
Sanjeev Choudhary & Chaitali Chakravarty NEW DELHI
INDIA’S second-largest listed realty company, Unitech, has sought government approval to float global depository receipts (GDR) to raise a maximum of Rs 5,000 crore ($1 billion). If the company were to successfully raise the entire amount using GDR pricing formula, as per Unitech’s application, promoter stake could get reduced to 36.7%. Promoter stake in Unitech has already dropped 7% to 67.4% in the three months to December ‘08. A Mumbai-based real estate analyst, who did not want to be named, said the decline in promoter stake was probably due to sale of pledged shares by financial institutions, which had lent to the promoters. It is widely believed, although not verified, that promoters have much more shares pledged with lenders. Unitech didn’t comment on stake decline or shares pledged with lenders. Unitech’s shares fell 3.4% to Rs 28.30 on Thursday. Unitech earlier announced that the company’s board had approved, on December 22, the issuance of fresh securities to raise Rs 5,000 crore through fresh issuance of securities, including equity shares, convertible preference shares or debentures, GDR and ADR. Now it is believed to have decided to go ahead with a GDR issue. GDRs are shares issued in overseas market to persons who are not residents of India. As per Unitech’s application to foreign investment promotion board (FIPB), the nodal body clearing foreign investment in India, the firm is planning to issue over 40 crore GDRs at a price of Rs 36.78 - calculated as per GDR scheme. The GDR issue will reduce promoter’s stake to 36.71% from 67.45% as of December 31, 2008. Postinvestment, GDRs would comprise 45.57% of total shareholding. Analysts are sceptical about Unitech’s ability to get enough investors to subscribe to the company’s GDRs, given the poor state of markets globally. Unitech’s portfolio of assets, one-tenth of which comprises non-FDI compliant projects, might come as a hurdle for speedy government approval. The company has given an undertaking that GDR proceeds will be used only in the FDI-compliant projects, but it’s unlikely that the government will allow Unitech to induct FDI, without asking it to hive off non-FDI compliant projects. Recently, the government rejected Gurgaon-based Vatika group’s proposal to retain non-FDI compliant assets post-FDI infusion. Real estate developers seek to retain such assets in a bid to keep a higher valuation for the company. Unitech on Monday claimed that it has been able to reduce its debt obligation due by March ‘09 to Rs 600 crore from Rs 2,500 crore through repayment and roll-over. sanjeev.choudhary@timesgroup.com