Unitech: Back in business

Unitech’s focus on mid-segment housing seems to be paying off. Between April and July, the property firm sold bookings for close to 7 million square feet and a good part of this was at price points of between Rs 2,700 and Rs 3,000 per square feet. Should the momentum sustain, the company will meet its target of selling 20 million sq ft in the current year. In fact, the June 2009 quarter saw launches for around 16.5 million sq ft.

The Unitech stock has rallied sharply to levels of Rs 95 from the lows of Rs 25 that it hit in March this year. Despite raising Rs 600 crore through a qualified institutional placement (QIP), Unitech’s net debt levels didn’t come off too much. Compared with Rs 8,400 at the end of March 2009, the net debt at the end of June stood at Rs 7,600 crore; analysts had hoped for a smaller number.

However, with the company having raised around Rs 2,800 crore from a second QIP, the net debt-to-equity ratio is down to 0.6 and is expected to fall to 0.4 by the end of the year.

Analysts are also disappointed with consolidated earnings for the June quarter; even though expenses on interest fell, earnings declined 63 per cent year-on-year to Rs 156 crore.

It’s possible the company didn’t recognise revenues as anticipated — net sales fell 48 per cent year-on-year to Rs 539 crore though they were up 34 per cent sequentially.

Nevertheless, Unitech now has a much cleaner balance sheet and a lower weighted average cost of capital. ICICI Securities has estimated a net asset value of Rs 91 per share for 2009-10.