Unitech's Debt Conundrum
India's second-largest listed real estate company, Unitech, is navigating a precarious financial landscape, grappling with a substantial debt burden of Rs 2,500 crore, due by March 2009. In a bid to mitigate this pressure, the company is engaged in discussions with public sector banks to restructure a significant loan of approximately Rs 800 crore.
Debt Restructuring: A Beacon of Hope
- “We are in discussions with public sector banks for rescheduling our loans,” affirmed R Nagraju, Unitech's Head of Strategy and Planning.
- An unnamed company executive corroborated this, stating that Unitech is indeed seeking to restructure a loan exceeding Rs 800 crore.
Regulatory Support
The Reserve Bank of India (RBI) has recently introduced a directive allowing banks to restructure loans for commercial real estate projects without categorizing them as non-performing assets (NPAs). This move follows intense lobbying by real estate firms, which have been struggling to service debt due to dwindling sales and the unavailability of fresh debt.
Industry Sentiment
- Most developers express optimism regarding the banks' willingness to reschedule loans, citing the mutual benefit of reduced NPAs on bank records.
- A Delhi-based mid-sized developer, preferring anonymity, rationalized, “It makes sense for banks to reschedule loans... If banks were to re-possess land, given as collateral by developers, they may get in trouble, as land in most cases was over-valued, and prices have been falling since the loans were disbursed.”
Unitech's Multifaceted Approach
- Asset Sales: Unitech aims to raise capital through the sale of assets, including hotels, office buildings, and land parcels. While deals for its Gurgaon hotel and New Delhi office building are pending, the company has successfully sold a school plot for around Rs 30 crore.
- Private Equity Infusion: Unitech is exploring options to raise funds through private equity investments at both the company and project levels. An extraordinary general meeting (EGM) scheduled for January 19 will seek shareholder approval to raise Rs 5,000 crore via the issuance of fresh equity or convertible instruments.
- Negotiations with PE Players: The company is in talks with multiple private equity players to secure between $300-$500 million through the issuance of convertible debentures at the company level, and approximately $200 million by selling stakes in mid-income housing projects.