Unitech says brand not hit by 2G scam

Unitech founder and chairman Ramesh Chandra gets into office at 9.30 am every weekday and leaves at 4 pm sharp. That has been the work schedule for Chandra, 70, over several years, perhaps decades. A routine unchanged even after younger son Sanjay Chandra was taken into judicial custody early last week in connection with the telecom spectrum scam.

That’s one of the main points put forward by senior company officials when asked whether the working structure had undergone any change after Sanjay got arrested. Sanjay Chandra is managing director of Unitech and chairman of Unitech Wireless, the telecom venture with Norwegian partner Telenor.

It is here that Unitech is making a distinction between the real estate business and the telecom venture, to preserve its brand. “The two (realty and telecom) are separate businesses, operated from different offices… There are no operational linkages between them… There is only the ownership connection (Unitech holds around 33 per cent in the telecom venture) ,” said Unitech vice president (corporate planning) R Nagaraju, in an interaction with Business Standard.

Sanjay’s elder brother, Ajay Chandra, has been at the helm of the real estate business ever since Sanjay went fully into telecom in 2009.

Was entry into the telecom sector a mistake for Unitech? Company officials preferred to skip that question, saying Sanjay Chandra would be the right person to answer that.

Nagaraju claimed brand Unitech was not hit by the recent developments, so there was no immediate need to launch a marketing strategy. The reality, according to officials, is that customer response to Unitech’s ongoing projects, around 10 of these spread across multiple cities, has been good. Going by the customer response and timely delivery of projects, the brand has not been impacted, they said.

On addressing shareholder concern over the 2G scam, Nagaraju pointed out that “They are interested only in the real estate business. They are not worried about telecom.”

On the issue of Unitech not giving out sufficient information to rating agencies, Nagaraju replied, “Right now, we don’t have any outstanding loans from mutual funds. So, we are not required to give information to the rating agencies.” As for corporate rating of Unitech, officials said it was up to a company whether it wanted to get rated or not. Prior to 2009, Unitech used to borrow from mutual funds, and for that it is mandatory to get the instrument papers rated, by the regulatory guidelines. The mutual fund debt has since been retired.

Credit Analysis & Research Ltd general manager Milind Gadkari told Business Standard, “Corporate governance issues such as these would have some impact on ratings.” Adding, “However, when such matters are under judicial inquiry, it is very difficult to comment on the same and one has to wait for the outcome of the judicial process. Also, in case it impacts day-to-day operations, it may warrant an immediate change in the rating.”

Rating agency, Fitch, had recently moved the ratings of Unitech to the Non-Monitored category, ‘due to lack of adequate information’. Icra managing director Naresh Takkar told the paper that if there was a likelihood of a company or its promoters getting indicted, the rating was usually put on watch. However, Takkar said, mere investigation does not necessary lead to downgrading of a company or its instruments/services.