Fitch downgrades Unitech's rating

Ratings agency Fitch Ratings on Tuesday downgraded realty major Unitech Ltd's (Unitech) Long-term rating to 'BBB-(ind)' from 'A-(ind)' (A minus) and maintains its negative long-term rating outlook. The downgrade reflects the ongoing delay in the completion of asset sales, and its impact on the company's ability to service its short-term debt obligation, the global credit rating agency said.

The Negative Outlook reflects Unitech's reduced liquidity position, as the company is facing significant maturities during the next six months (principal amount around Rs 27 billion) and the ensuing substantial refinancing risk. The liquidity risks are accentuated by the tightness of the credit environment.

The Outlook also reflects potential further negative pressure on cash flow generation and credit metrics, stemming from a more adverse real estate sector environment than previously envisaged.

"With Rs 15 billion (Rs 1,500 crore) of repayments due in December 2008 and January 2009, Unitech's ability to manage these repayments remains largely dependent on the potential cash flows from the sales of assets and investments," Fitch added.

Further, the next three to six months remain crucial for the company and the current ratings remain contingent upon Unitech's ability to manage its ongoing debt maturities, Fitch noted.

The earmarked asset sales include various completed properties which the company had earlier expected to retain on its books, as well as investments such as telecom. Fitch expects around Rs 1,500-1,600 crore to be raised through these initiatives over the near term. However, any further delays in obtaining these cash inflows would result in further downward pressure on the ratings.

Earlier, on November 11, 2008, Fitch had said that it expected the asset sales to be completed by December 2008, and noted that the unsuccessful completion of the projected asset sales would trigger a ratings downgrade.

65-acre township project in Bangalore

Bangalore-based Orange Properties, a subsidiary of the real estate marketing agency Orange Group, has announced the launch of a 65-acre township project near Devanahalli in Bangalore, where the company offers villas and apartments at the “cost price”. This is the second development project for Orange Group, which was hitherto marketing projects of other builders.

R Vijay, founder and CEO, Orange Group said, “Cost price means prevailing land cost plus the actual cost of construction.”

The four-day offer is set to open on December 25. But from the fifth day of the launch, the prices would see a hike, wherein the company would add its 25 per cent margins, Vijay added.

Phase 1 of the project would see development on 25 acres, with 800 apartments, 270 villas and 45 row houses being planned with sales realisation of Rs 400 crore.

“The villas would be offered from Rs 70 lakh onwards, and we are offering an international luxury sedan free for the first 50 bookings,” Vijay said.

The size of apartments in the township would be 800-1,350 sq ft, starting from less than Rs 20 lakh. The company plans to have 12 launches next year; the next project would be launched in February.

The company has earmarked Rs 32 crore for advertisements till March, Vijay said.