Is Omkar buying Unitech out of JV?

Unitech Ltd, India’s No. 2 realtor by market capitalisation, is completely exiting Unitech Omkar, its joint venture with Mumbai-based Omkar Realtors Developers, sources privy to the development said.

Though the venture had fallen apart in May, the partners were believed to have decided to continue the projects launched by the company as individual special purpose vehicles (SPVs).

Now, sources said, Omkar will pay off Unitech the Rs 250 crore or so it had brought to the JV and some more, and undertake development of the project on its own.

The 50:50 JV had planned to undertake development of 10 million square feet (msf) in the next three years.

In May, while separating, the two partners had decided to complete the 1 msf of launched projects together as SPVs.

When contacted, Omkar Realtors said the SPV arrangement would continue. “Even though the JV ceases to exist at an entity level, the working arrangement between the two companies is being redefined to an SPV arrangement for which the modalities are being worked upon... all project’s will be executed as per the defined timelines. Debt payment may be a default outcome once the modalities have been worked out,” a spokesperson said.

On paying Unitech Rs 250 crore, the Omkar spokesperson said the modalities were being worked out.

A message sent to Unitech failed to elicit a response.
Analysts had valued the JV at Rs 3-5 per share of Unitech.
“Now that Unitech is not part of the project anymore, the share price will be impacted,” an analyst with a domestic brokerage said.

Suhas Harinarayanan, Suman Memani and Arun Aggarwal of Religare Securities had written in a note to clients on May 31 after the news broke. “We estimate maximum impact at 8% to current market price and 5% to NAV before even considering any refunds.”

“We take value of Mumbai business at 40% discount to account for possible expiry of venture with Omkar Developers in Mumbai,” the Religare trio had written.

Unitech has another JV called Shivalik Ventures with Haresh Mehta promoted Rohan Developers, which is developing the Golibar commercial project.

Together with Omkar, the two JVs accounted for Rs 10-12 of Unitech’s share price.

Unitech is has a portfolio of 42 msf in Mumbai, of which its share is 50%, or 21 msf.