Unitech to Sell Non-core Assets to Pay off Debt

Company plans to reduce debt by 10-15% every year through sale of assets

    Real estate firm Unitech will sell non-core assets such as land, IT parks and SEZs to pay off its debt, which currently stands at . 5,300 crore. In a rare interview Unitech managing director Ajay Chandra said the company, India's second biggest real estate company after DLF, has also managed to tie-up debt of about . 550 crore from two public sector banks in the last few months, after facing significant debt financing crisis in the last six months. 

Mr Chandra said the company would raise . 300-400 crore this year by selling land parcels, including one in Thiruvananthapuram. Unitech has also started talks with various private equity funds as well as overseas real estate investment trusts (REITs) to sell its four SEZs and one IT park. The company has close to 5.5 million sq. ft. of rent producing office space and another 2 million sq ft will be ready in the next 18 months. This is spread over four SEZs and one IT Park. Mr Chandra pointed out that the sale of SEZs would be completed in the next fiscal year as they now await the reaction of the SEZ authorities on some of the other SEZ transactions that have taken place in the market recently. "In the meanwhile, we will not lose any money as we are already earning rent from these assets," he said. In the April-June, 2011 quarter, the company reduced its debt by . 203 crore through its cash flows. Unitech's debt has come down from a peak of . 10,500 crore at the end of December 31, 2008. Yet, the interest burden has not reduced owing to regular increase of bank rates. "The two big challenges for the industry today are mounting debt and lack of financing. We all have to move towards lesser debt than we have been used to before. Our debt to equity ratio is currently at 0.4, which is a low level of debt but it needs to be lower," he said. "We intend to raise close to . 500-700 crore annually for the next few years through sale of these assets. The target is a 10-15% reduction of debt on an annualised basis," said Mr Chandra. 
For the last six months, Unitech has had to face severe debt financing issues, both because of the problems around the industry as well as the 2G scam, in which, one of the company's promoters is in jail for the last four months. In the last couple of months though, the company has seen some movement among banks. "We got a first sanction from a PSU bank in themonth of July for . 350 crore, which we will take in tranches," said Chandra. It has also tied up . 200 crore from another PSU bank, which will be disbursed in the next few months. 
On Monday, Unitech's shares recorded an intra-day gain of 13% after the CBI told the special court that it has no evidence that Unitech Wireless, which has been charged with cheating, criminal conspiracy and forgery in the 2G spectrum scam, paid bribes to A Raja, the former telecom minister.