Unitech ratings stay same despite part debt repayment

New Delhi: The ratings of Unitech Ltd, the country’s second largest real estate firm by market value, will remain unchanged although it reduced its debt obligation by March by 75%, brokers said.

Five brokerages polled by Mint said they would maintain their rating on Unitech. Two of the firms have a “sell” rating on the property developer, one has an “accumulate” rating and the remaining two have a “neutral” rating.

The company’s stock price fell 4.39% to Rs30.50 on the Bombay Stock Exchange (BSE), on a day when the exchange’s bellwether Sensex index retreated 2.45% to 9,100.55 points. The BSE Realty index that includes 14 firms, declined 3.31% on Tuesday.

DLF Ltd, India’s largest real estate developer by market value and Unitech’s closest rival, fell by 2.95% to Rs189.40.
“We want some more substantial data from the company before changing the rating,” an analyst with an international brokerage firm said on condition of anonymity.

An analyst with a domestic brokerage, who did not want to be named, said he has been briefed by the firm and that its troubles are far from over. Unitech has repaid Rs400 crore to mutual funds (MFs) and the remaining dues by March have been rescheduled for payment in FY10, he said.

The firm said on Monday it has cut its debt obligations due by March to Rs600 crore from Rs2,500 crore, by repaying in part Rs900 crore to MFs and restructuring some bank loans.

“Rising interest costs will make debt repayment a challenge in fiscal 2010,” the second analyst said. “The company had a net debt of Rs8,300 crore as of September 2008 and out of that Rs2,000 crore is repayable in fiscal 2010. So, if you add to it an interest of Rs 1,000 crore (at 13% interest rate), the company will have to pay a total of Rs3,000 crore in fiscal 2010.”

Unitech, meanwhile, made an application to the Foreign Investment Promotion Board on 14 January to reclassify itself as a “operating cum holding company”.