Unitech is strategizing to raise between $300 million to $500 million via the issuance of convertible debt instruments targeted at multiple private equity investors.
According to a source familiar with the plans of the company, Unitech, which is in urgent need of cash to settle a debt amounting to Rs 2,700 crore within the next three months, is currently in discussions with various global private equity players, including notable firms such as TPG Axon, Carlyle, Och-Ziff, Sun Apollo, and IL&FS funds. The real estate firm aims to issue these debt instruments with the expectation that they can be converted into equity within approximately 18 months.
Based on the company’s current market capitalization, the proposed $300-500 million could represent about 22 to 36% of the company's equity stake. The promoters, identified as Ramesh Chandra and his family, hold a significant 74.5% stake in Unitech. An investment banking executive speculated that the conversion price might hover around Rs 60 per share, though this information remains unverified.
Additionally, Unitech is set to explore avenues for raising roughly $200 million from its various residential projects through special purpose vehicles. UBS is engaged to provide advisory services on Unitech's complete fund-raising strategy. Unitech’s Managing Director, Sanjay Chandra, conveyed, “Multiple funds have shown interest in investing in the company as well as its projects. We are evaluating the proposals.”
The company’s board has already endorsed a plan to raise Rs 5,000 crore via various securities. Still, skepticism remains regarding Unitech’s capability to secure an investor at a favorable price. An analyst from a brokerage based in Mumbai highlighted the challenges for Unitech in raising funds, suggesting that institutional investors might not be willing to offer a substantial premium for a stake in the company.
On the stock exchange, Unitech’s shares fell by 7.5%, concluding at Rs 42 on Tuesday. In a subsequent report, Fitch Ratings downgraded Unitech's long-term rating from ‘A-(ind)’ to ‘BBB(ind)’, citing ongoing delays in asset sales and their consequences on the firm’s ability to meet short-term debt obligations.
A report released on December 11 by Singapore’s Kim Eng securities broking group indicated that Unitech is obliged to secure Rs 1,800 crore in the coming three to four weeks to maintain operations.
In another development, the company’s hotel venture in Gurgaon may face postponement due to valuation discrepancies. Unitech anticipates a valuation of Rs 270 crore, but potential buyers, including four businesspersons operating gutkha brands like Dilbagh, Vimal, Pan Bahar, and Rajshree, reportedly resist an offer above Rs 210 crore, according to a participant in the negotiations. While hotel chains such as ITC and Accor have expressed interest, sources report that Unitech may need to substantially reduce its asking price to secure a deal with these hotel entities. An executive from Unitech hinted that the transaction might not materialize, as the gutkha investors appear to lack adequate funds to proceed with the investment.