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Event: Independent directors of Unitech Corporate Parks (UCP) have rejected
Unitech’s (UT) ‘possible’ open offer of GBp 31/share for UCP, citing lower-than-fairvalue
offer by UT (GBp 31/share) against GBp 52/share value estimated by
independent valuer appointed by UCP’s independent directors. As per the
independent valuation, UCP’s valuation has declined in value by 38.5% from
March 2010 portfolio valuation owing to changes in market conditions, likely
effect of proposed changes in the Direct Tax Code in respect of Special Economic
Zones ("SEZs") and the company's revised construction programme. Most
importantly, a new methodology was also used which now values partially
constructed developments and undeveloped land on the basis of comparable land
values plus cost of construction to date.
Background: UT had listed UCP at GBp 100/share. UCP has a lease portfolio of 21.4
msf of projects across five IT SEZs and one IT park, (two in Gurgaon, two in Noida,
one in Greater Noida and one in Kolkata). UCP owns ~60% in each of the assets
enumerated above, with UT holding the balance ~40%. UT holds 4.52% of UCP
through Nectrus. We have valued UT’s 40% share in these assets at INR 14 bn and
UCP’s share in these assets at INR 21 bn (80 GBp/share for UCP at current exchange
rates).
Impact: NAV neutral; removes overhang of possible debt increase in UT
• We had not estimated any upsides to UT’s NAV on account of the offer; hence,
the rejection is NAV-neutral.
• As enumerated above, UT would have had to bear an acquisition cost of ~INR
7.73 bn to buy out UCP equity. Hence, a potential overhang of increase in debt
has been eliminated (UT’s net D/E at 0.54x as of September 2010).
• We currently have the stock ‘Under Review’ due to the overhang of the CAG
report on Uninor spectrum allocation and lack of clarity on Lehman’s put option
in Mumbai Golibar project.
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