Unitech net profit slumps 98% in Q4 FY12

Unitech Ltd, the third largest realtor in the country according to market capitalisation, has posted 98 per cent drop in net profit, which stands at Rs 2.26 crore for the quarter ended March 2012, as compared to Rs 102.5 crore in the year ago period. Besides the dwindling profit margins, the company’s cash interest ratio has increased significantly. Unitech’s EBIDTA margin stands at a mere 5.4 per cent for Q4 FY12.

Apart from the dismal performance for the quarter, its project launches for the entire year(2011-12) have also witnessed a significant drop. The company has launched 7.19 million sq. ft. for FY12, compared to 9.2 million sq. ft. in the corresponding period last year. In FY10, it had launched 16.6 million sq. ft.

However, Ajay Chandra, managing director of Unitech, said, “We plan to deliver nearly 9 million sq. ft. of development during the current year.”

Project execution has also been dismal and the company managed to deliver 3.4 million sq. ft. during FY2011-12. Of the 24.3 million sq. ft. it had launched before March 2009, only half has been delivered till date. Unitech delivered 0.2 million sq. ft. last year for projects which it had launched since March 2009. The company had launched 23.5 million sq. ft. since FY10 and delivered a paltry 0.2 million sq. ft. Thus, of the 47.9 million sq. ft. it has to deliver, 35 million sq. ft. or nearly 73 per cent of the deliverable is still pending.

Unitech’s operational report for April 2011-March 2012 indicates that the company’s average realisation in residential sales for Q4 FY12 has dropped to Rs 3,863 per sq. ft., its lowest in the last one-and-a-half years. Its average realisation for non-residential operations is Rs 11,788 per sq. ft., but its overall average realisation for the quarter stands at Rs 4,350 per sq. ft., a drop of 30 per cent, compared to the last quarter in the same financial year.

Even after poor financial performance Unitech scrip closed at Rs 21.50, up 7.77 per cent, on the BSE in a weak Mumbai market on Wednesday.

“FY 2011-12 was a very challenging year, particularly in terms of availability as well as cost of funding for real estate projects. This has resulted not only in an increase in financing costs for the company but also adversely affected the construction activity during the year,” added Chandra.

To add to its woes, the company’s auditors have also noted that as the 2G licence matter is sub-judice, the consequential impact of the investment of Rs 912.86 crore in Unitech Wireless by Unitech cannot be ascertained. As a result, the recoverability of Rs 301.38 crore short-term loan cannot be ascertained, which is also under litigation.

According to the auditors, advances against projects pending commencement have amounted to Rs 660.47 crore while advances for purchase of land have amounted to Rs 961.38 crore under short-term loans. It has been cited that some of the advances are outstanding for a longer period of time and the recoverability or subsequent adjustments of the same cannot be ascertained either. Unitech has said in its disclosure that these are part of the normal business and are considered good for recovery in due course.

Auditors have also cited that investment aggregating to Rs 61.86 crore and loans & advancements aggregating to Rs 65.09 crore have incurred losses and have negative net worth, although the management has convinced the auditors that in the future, it will turn positive.

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