Unitech promoters to infuse Rs 1,000 crore

Unitech promoters to infuse Rs 1,000 crore
Business Standard, May 20, 2009, Page 6

BS Reporter / Mumbai

Also divesting stake in its non-core assets such as hotels.

Unitech Ltd, the country’s second-biggest real estate developer, has announced the approval of a plan by its board to raise additional long-term funds by selling securities and issuing convertible warrants to its promoters.

This was communicated by the company in a statement to the BSE.

A source involved with the development said the promoters will invest as much as Rs 1,000 crore through subscription of the warrants, of which Rs 275 crore will be brought in by June.

After conversion of the warrants, the promoters’ stake is expected to go up by 10 per cent to 61 per cent.

“The subscription to the convertible warrants emphasises the confidence of the promoters in the company,” a company official said on condition of anonymity.

The additional infusion of capital is expected to help the company in reducing its debt to equity ratio considerably. The realtor has about Rs 8,400 crore of debt on its books.

The move to infuse additional capital into the company comes after Unitech offloaded some stake worth $325 million last month to select investors in order to tide over tight liquidity.

The promoters’ stake had fallen to 51 per cent after issue of new shares to overseas investors.

The promoters of Unitech are expected to liquidate their investment in other ventures to bring in the additional capital, the source said.

Indian realtors are facing a severe cash crunch as sales of offices, homes and shops have tumbled, owing to the economic slowdown.

In an attempt to boost cash flows, Unitech and other developers are now focusing on launching affordable housing projects, which have received a good response from buyers in the past couple of months.

Unitech is also divesting stake in its non-core assets, such as hotels and land parcels meant for other purposes. The New Delhi-based real estate developer has already raised Rs 231 crore from sale of a hotel in Gurgaon.

The company plans to sell four of its hotel projects, including in Noida, Kolkata and Gurgaon, as part of its asset sale plan and will also bring in private equity at project level.

Besides, the company has decided not to acquire land in the near future, except for extremely attractive opportunities.