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Unitech Mops Up $575 Mn Via Private Placement; Buyers Not Known

28 June, 2009

Real estate major Unitech has just raised $ 575 million (Rs 2,800 crore) through placement of shares with overseas investors at Rs 81 per share. This comes on the back of almost 9 times oversubscription for the mid sized IPO of Mahindra Holidays & Resorts which closed on Friday.

These two fund raising activities show that liquidity flows into India have not witnessed any setback as feared in some sections of the market who feel there is a deluge of qualified institutional placements (QIPs), more than what can be absorbed.

IDFC-SSKI, UBS, Morgan Stanley and Credit Suisse were reportedly the bankers to Unitech. In terms of size this is as big as the QIP by Indiabulls Real Estate which raised a similar amount (Rs 2656 crore) in May 2009, according to a report by Times of India.

Unitech had planned to raise only $200 million but as the demand from investors was huge, it decided to increase the issue size. The report said the total demand in the auction was for over $1 billion.

The realty firm will issue 342 million shares, which will bring down the promoter’s stake in the company to around 43% (from 51%). But after the conversion of warrants, subscribed by the promoters at Rs 50 per share cumulating to Rs 1,155 crore, Chandra family stake will increase to 49%. On a fully diluted basis Unitech is now valued at around $4.5 billion as against its market capitalisation of just $710 million in November 2008 when its scrip hit a one year low.

Last month the firm had announced that it is looking to issue upto 1 billion new shares to raise long term funds.

This is the second large external fund raising initiative by the firm in three months. In April, Unitech had raised $325 million by selling 421 million shares through a QIP at Rs 38.50/share. The investors in the first issue included Singapore’s GIC, HSBC, UK’s Prudential, Orient Global and Sandstone Capital. Given the sharp rise in share price since then these investors have more than doubled their investment value in three months.

The money raised in the second tranche will be partly used to repay the high cost debt and to launch affordable housing projects in various regions of the country. At present, the company has a loan of Rs 7,800 crore. Unitech has raised more than $900 million over the last three months.

Although Unitech still has room to issue more shares it may wait a while to do so as it cannot go for another QIP for the next three months. As per norms there has to be a gap of atleast 6 months between two QIPs by the same company.

Due to high interest rates and global financial crisis, the demand for houses had suffered in the second half of 2008. Thereafter developers sifted their focus on the low cost housing sector. But high cost of corporate lending had continued to trouble property developers who were sitting on huge landbank acquired at sky-high prices. 


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Unitech Mops Up $575 Mn Via Private Placement; Buyers Not Known

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