Unitech to shed 40% stake, mop up Rs 4,000 crore

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New Delhi: The country’s second largest real estate firm, Unitech, which is facing a severe cash crunch, is close to offloading 26-40% stake to raise around Rs 4,000 crore.

According to sources, the company is not looking at dilution of equity but is instead opting for convertible bonds where it will have the option of buying back once its share prices go up with improved sentiments.

According to industry sources, the company is likely to finalise the deal within next week. US-based asset management firms, with whom Unitech is understood to be in talks, are Bain Capital and Avenue Capital. UBS is advising Unitech on the deal.

Unitech has an outstanding debt of Rs 2,700 crore, which will have to be cleared by March 2009. At the end of September 30, 2008 – the end of the second quarter of the current financial year – its net debt was Rs 8,300 crore.  

Currently, the market cap of Unitech is at Rs 5819.51 crore. The company’s shares on Friday prices fell 1.4% to close at Rs 35.9 on the Bombay Stock Exchange.  

In addition to raising Rs 4,000 crore, Unitech is also planning to mop-up Rs 500 crore from its real estate international fund — Unitech Realty Investors Private Ltd. This fund has raised Rs 2,000 crore in the past two years and received a commitment of Rs 1,500 crore from high net worth individuals and pension funds last year.

It has been used for investments required by Unitech and not for external funding purposes. This asset management company has several funds CIG1, CIG2, CIG3 and money from these will be used to develop residential projects of the company.  

On Friday, the BSE realty index stood at 1864.09, down 5.2% from Thursday’s close. During the week, it fell by 24.61% and the decline since last year has been 86.26%.

In fact, all realty shares took a beating on the bourses on Friday. The country's largest real estate firm, DLF, closed at Rs 217.60 on the BSE, down 7.3%, Ansal API closed 10.3% lower at Rs 26, Omaxe was down 5.4% at Rs 55.20. Only Parsvnath’s shares closed higher by 3% at Rs 41.60.