Just one day made the difference. It was January this year and Sanjay Chandra was on his way back to India having sewn up a deal to raise a billion dollars from private equity players. The press had been put on standby for an announcement that would have made a world of difference to Unitech Ltd, India’s second-largest listed real estate developer.
Then fate intervened. On two successive days — January 21 and January 22 — the Indian stock markets fell off the roof. Things changed overnight for investors and borrowers alike. Valuations crashed. Chandra had to put off the fund-raising deal for the markets to stabilise.
It has been a rocky ten months ever since. The Indian stock markets have gone from bad to worse. Unitech, like other real estate firms, has seen its market cap erode by up to 90 per cent. Its share price hit a new low last week after rumours surfaced that the company had defaulted on payments — it had actually sought a roll-over, which was granted. Real estate sales have dipped, even as developers find it hard to raise money to complete ongoing projects.
Many reckon that Chandra was smart in bagging a nationwide licence to offer telecom services. He spent the past few months trying to rope in a strategic partner to help fund and run the wireless subsidiary. At the outset, Chandra was willing to offer only 26 per cent, or at best 49 per cent, to a foreign partner and that too someone who knew the game. The asking price was in the range of $4 billion. He had moved fast to put in place a smart team of telecom industry veterans and was keen on letting the professionals run the operation.
By the third week of July, negotiations had gathered steam in New Delhi’s fancy Imperial Hotel. Talks with the likes of Etisalat (which subsequently tied-up with Swan Telecom) had been on for some time, but were deadlocked over valuation and management control issues. Chandra was confident that the deal would be done his way, and his way only.
Taking a short break from the talks, Chandra strode down to the lobby of the hotel. As he sat down to meet Business Standard reporters, he got a call. It was the investment banker calling to say that he was needed back on the negotiating table. He agreed, but not before joking that perhaps she needed to work harder to earn her fees for the deal. Clearly, things were on track and looking good.
Earlier this week, Chandra finally cut that long-in-the-making deal with Norway’s Telenor, giving up 60 per cent stake and management control in the wireless subsidiary. The valuation (at just over $2.1 billion, around Rs 11,630 crore) was much lower than he had earlier hoped for.
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Critics say even this is a steal and several times more than the Rs 1,800-2,000 crore that Unitech spent on bagging the licence. They add that Chandra should thank God that he has managed to pull off a deal that helps him cut debt and retain sizeable equity at a time when his ability to leverage his stock has all but disappeared.
More than the immediate financial gain, it is clear that Chandra has actually pulled off a coup of sorts in saving his venerable flagship firm, one that his father, Ramesh Chandra, had built up painstakingly over the years.