Unitech plans to spin off its non-core businesses (construction, telecom, power, SEZs and amusement parks) and focus entirely on real estate. We believe the objective behind the de-merger is to create two separate listed entities that will allow for a sharper business focus. The move will also enable the management to raise funds more easily in the non-core entity as compared to the real estate business.
We believe the proposed non-core entity would comprise the company’s 40% stake in Unitech Corporate Park (UCP), 50% stake in Unitech Amusement Park, 32.5% holding in Uninor Wireless (telecom), and the in-house construction and power transmission divisions.
Unitech holds a 50% stake in Unitech Amusement Park which owns two parks, one in Noida and another in Rohini (Delhi).
Unitech holds a 32.5% stake in its telecom business – Uninor Wireless, which we have valued at Rs 29.6bn (based on Telenor’s 67.5% stake acquisition in Uninor for Rs 61.3bn). We value the construction business at 4x Market cap/EBITDA (~Rs 1bn) and power at Rs 1bn.
We expect the spin-off to unlock value for investors and hence maintain our Buy rating on the stock with a target of Rs 101. Don't Go for FRESH BUYS, HOLD if already Bought.
