Unitech to focus on Mumbai market, debt reduction

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Unitech to focus on Mumbai market, debt reduction

In an exclusive discussion with CNBC-TV18, Unitech Managing Director Sanjay Chandra has said the company�s core focus remains bringing down its debt and concentrate on Mumbai as a market.

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The global financial meltdown saw real estate developers running for cover, projects were stalled, balance sheets leveraged and access to capital denied. But one man fought back from the brink of disaster to survive the odds. Sanjay Chandra can smile today. Unitech has emerged as India's fastest wealth creator in the Motilal Oswal Wealth Creator study although second time in a row.

Quite an achievement for a company that was burdened with a debt of a whopping Rs 12,000 crore but Chandra proved its detractors wrong and hit the market with not one but two qualified institutional placements (QIPs) netting almost USD 900 million. Today Unitech which in 2001 had a market cap of just USD 10 million is a USD 4.15 billion company and Sanjay is all set to dial into fiercely competitive telecom market with Norway's Telenor.

Chandra says the company's core focus remains bringing down its debt and concentrate on Mumbai as a market.

"Our debt is at 0.5 times the equity," Chandra said. At the height of the economic downturn in 2008, Unitech faced flak from investors for its high debt and its share prices were hammered down in the stock market.

In 2009, Unitech resorted to asset sales and executed two successful fund raising drives by selling shares via the qualified institutional placement (QIP) route. "We plan to bring down the debt for Rs 1,000 crore from Rs 5,000 crore in a year," Chandra said.

Unitech's revenues from Mumbai are expected to increase to 40% from 5%, Chandra said, adding that Mumbai and the National Capital Region (NCR) would now contribute 70% of its business. "We are looking at selective land acquisitions in the two regions."

Here is a verbatim transcript of the exclusive interview with Sanjay Chandra on CNBC-TV18. Also watch the accompanying video.

Q: We have just had the Motilal Oswal report and you are the fastest wealth creator second time in a row at the end of perhaps the worst year to the real estate sector seen not just in India but globally as well. How do you feel - relieved, elated, vindicated, what is the sense that you have at this point?

A: The whole thing is for the last many years we have been working as a company to create shareholder value. So it feels good to be rewarded, it feels good to see the market is understanding our story and sticking by us and investing in us repeatedly. Unitech has been listed for about 25 years. In our entire history till only April this year we had only raised about 35 crore from the public market.

So we were always very frugal on capital and were able to produce superior results and return on networth because of our official business model. Even though we got caught in the downturn of the real estate cycle, we were able to reconfigure our business strategy, our business plan and our product.

Q: When you were really in the heart of the downturn, when everybody was writing off the real estate story, what did it actually take you to convince investors that in spite of the leverage that you were actually sitting on, in spite of the debt that you were actually sitting on, this was not a story that was worth writing off at that point in time?

A: What we did was we focused on a few investors who were willing to listen to the whole story rather than get swayed by what they were hearing in the markets or the media with all the rumours going around. So we went on with the whole opening of the capital market per se, there was no capital market issuance which had happened in India for over a year.

So it was actually a tough task in opening the capital markets and of course selling the story was relatively easier because what our equity investors saw was real value. They saw real assets, they knew we had a cash flow issue in the short-term and that would actually get solved if we raise capital. So they saw it as the capital coming in would rerate our stock in the short-term for them but most of the investors, which we targeted were people who have a longer-term horizon.