Unitech's Rs5,000-crore GDR dream sours

Cash-starved realty major Unitech, whose valuation has been hammered down in the Rs6,000-crore stake sale deal with Norwegian telecom operator Telenor (See: Telenor to get 67.25 per cent stake in Unitech Wireless), got another jolt with the government putting on hold its proposal for raising Rs5,000 crore through issue of global depository receipts.

The Foreign Investment Promotion Board (FIPB) is reported to have deferred a decision on Unitech's proposal for a GDR issue citing ''lack of transparency and disclosures'' in its business.

The FIPB action of deferring a decision on the GDR issue has also stymied Unitech's proposal to convert itself into an operating-cum-holding entity, reports quoted sources as saying.

Unitech, the country's second largest real estate developer, was seeking change in the corporate structure - from an 'operating' firm to a holding company – to enable it make downstream investments.

The FIPB decision follows observations made by the department of revenue at a meeting last month that the Unitech Group has a large number of direct and indirect subsidiaries and joint ventures in India and overseas and that it would be difficult for the government to monitor these investments.

Officials of the department of revenue also are believed to have expressed the view that the group ''lacks in transparency and key disclosures of their business.''

Unitech, which carries a debt burden of  Rs8,000 crore, said it would receive around Rs400 crore ($80 million) - against an earlier estimate of around Rs280 crore - that could be used to repay debt from the sale of a controlling stake in Unitech Wireless, its telecom unit.

But, months of uncertainty and a free fall in stock prices, have affected valuation of companies and buyout firms are aggressively renegotiating acquisition deals struck earlier.