DLF, Unitech aim to lower debt burden

DLF, Unitech aim to lower debt burden
The Hindu Business Line, May 20, 2009, Page 1

Moumita Bakshi Chatterjee, New Delhi

Real estate major DLF aims to nearly halve its current debt position of Rs 14,000-15,000 crore by the end of the financial year, and its rival Unitech wants to lower borrowings to Rs 6,000-6,500 crore from the existing Rs 7,800 crore.

Market analysts said that although the two companies have outlined aggressive plans to lower their debt obligation, achieving the target could take more time. “The companies are going for asset sale or sale of non-core businesses and that cannot be done overnight. The intention is correct but it may take time,” said a Mumbai-based analyst.

Market observers also felt that while the residential market appears to be showing some signs of improvement, it may be too early to raise a toast.

De-leveraging path

In an investor presentation circulated last evening, Unitech said that its operational strategy (improved operational cash flow, monetisation of non-core assets and debt management) along with recent fund-raising activity (QIP issue) had resulted in a “comfortable liquidity position”, but that debt levels were “still high”.

“De-leveraging will remain a focus area to reduce the interest expense, and utilise the saved cash for project development,” it said.

Unitech claimed that it has sold projects worth Rs 850 crore between April 1 and May 15.

The company is looking to prune debt to Rs 6,000-6,500 crore during FY10. Its debt stood at Rs 10,900 crore in December 2008 but subsequently dropped to Rs 8,400 crore after the Unitech-Telenor deal saw Rs 2,000 crore of telecom debt being transferred to Unitech Wireless’ balance sheet.

Asset sale

Unitech’s target for lowering the debt largely hinges on asset sales (commercial property in Saket, sale of hotels, school and hospital plots). It hopes to reduce the debt to Rs 4,500-5,000 crore by the first half of FY2011.

The promoters of DLF recently raised Rs 3,860 crore by selling their stake to institutional investors. Of this, nearly Rs 1,800 crore is likely to be injected into the privately-held DLF Assets Ltd which, in turn, will use the proceeds to pay DLF on “contractual obligations”.

“The Group would also raise money through sale of non-core assets such as the wind power business, and it has also put hotel sites on the block,” a senior DLF official said.

The official indicated that the Group may realise Rs 1,000-1,200 crore from the wind power business. “Similarly, the sale of our holding in Hindustan Spinning Mills site could fetch another Rs 400 crore,” the source said citing certain instances of asset sales.