Unitech Ltd, the country’s second-biggest real estate developer, plans to raise as much as $250 million (Rs 1,250 crore) through private placement of shares to qualified institutions, company officials said, to repay part of its debt of over Rs 8,000 crore.
The New Delhi-based developer plans to raise the funds by the end of this month, a company official, said declining to be identified. The company is planning to reduce Rs 1,000 crore of debt on its books by June this year.
Unitech Managing Director Sanjay Chandra and key officials of the company have been in Mumbai over the past couple of days to gauge investor sentiment. The real estate company has hired UBS and IDFC as arrangers for issue. A Unitech spokesperson declined to comment.
Unitech’s move comes after the developer withdrew its application with the Foreign Investment Promotion Board (FIPB) in February to raise Rs 5,000 crore from the sale of securities. A year earlier, the company planned to raise Rs 7,500 crore through a qualified institutional placement or QIP.
The recent rally in the stock market seems to have encouraged Unitech to revive its QIP plan. The company’s stock has climbed 70 per cent since March 9, while the benchmark Sensitive Index has risen 32 per cent. The company’s stock rose more than 14 per cent in the past two trading sessions and closed at Rs 42.05 on Thursday.
"With markets recovering from its lows, Unitech has started working on the issue,’’ said an investment banker who declined to be identified. “The dilution could be as much as 1/6th of the market cap.’’
If this QIP goes through, it will be the first such placement in as many as eight months after the Securities and Exchange Board of India changed QIP norms. Last August, the Sebi had amended pricing norms for QIPs by allowing companies to fix the price based on the average price of two weeks. Earlier, companies had to fix the price based on six-month average prices. Not a single QIP issue, however, has hit the market since then.
QIP deals, which were struck during the bull run at hefty premiums, have now turned sour because of the sharp fall in the valuations of listed companies.
The mark-to-market (MTM) value of QIP deals raised between March 2006 and March 2009 has fallen 73.47 per cent to $1.75 billion (about Rs 8,841 crore) from $6.58 billion (about Rs 33,245 crore), according to data from SMC Capital.
