By Saikat Chatterjee
Oct. 26 (Bloomberg) -- Unitech Ltd. Managing Director Sanjay Chandra blamed ``criminal'' speculators for the record 50 percent one-day plunge in the stock as India's second-largest real estate developer hasn't defaulted on loans.
Unitech is filing complaints with the Securities and Exchange Board of India to restrain ``bear cartels'' that spread ``malicious rumors'' to drive down the share price, Chandra told reporters in New Delhi today.
Investors are shunning Indian property stocks, leading to a 86 percent drop in the Bombay Stock Exchange's Realty Index this year, on concern the global credit crunch, faltering economic growth and rise in borrowing costs may curb sales and profits. Chandra aims to reverse a sell-off that saw Unitech plunge on Oct. 24 on speculation that it faces a shortage of funds.
``The clarification may stop the panic selling, but most investors may want to wait before they start investing'' again, said R.K. Gupta, who manages about $90 million in equities at Taurus Asset Management Co. in New Delhi. ``The global economic situation is the main reason why the realty stocks have been battered in India, and that's not going to change in a hurry,''
Borrowing costs are currently about 15.5 percent to 16.5 percent, compared with 12.1 percent for the year ended March 31, Chandra said. He declined to comment on Unitech's cash position before the company, the second-worst performer on the Realty index this year, reports second-quarter results on Oct. 31.
Investors' concern about the developer's funding was exacerbated when India's central bank said it would continue fighting inflation, reducing the likelihood that it will ease borrowing costs.
The developer fell the most since its trading debut in January 1991 to 31 rupees at the close of markets in Mumbai on Oct. 24. The stock, which had more than doubled last year, is down 94 percent from its record close of 538.25 rupees on Jan. 2.
India's central bank on Oct. 24 refrained from taking steps to make money less expensive. It had lowered a key lending rate on Oct. 20 for the first time since 2004 to ease borrowing costs that had climbed to a seven-year high.
Overseas Borrowing Rules
Asia's third-biggest economy this month also eased overseas borrowing rules, lifting curbs it had imposed last year, as policy makers stepped up measures to prevent a looming global recession from crimping India's economic growth.
Unitech scrapped plans for a $600 million sale of shares in a real estate investment trust in Singapore earlier this year, joining rival DLF in shunning equity markets after stocks plummeted. The developer will instead seek $300 million from private equity firms to build hotels and shopping malls in India this year, Chandra said in June.
The firm also sold a 50 percent stake in a Mumbai project to Lehman Brothers Holdings Inc.'s real estate fund for $175 million in June, before the U.S. firm filed for bankruptcy. Unitech collected that payment by July 18, Chandra reiterated today.
Unitech and other real estate developers have faced speculation in recent weeks that they face capital constraints.
Denies Rumors
On Oct. 24, the company was forced to issue a statement denying rumors that it had defaulted on payments for land acquired in Noida, near New Delhi, after the Business Standard newspaper reported that Unitech had rescheduled some payments.
The payments were rescheduled due to delays in handing over the land, and because construction had been blocked by agitating farmers, Unitech said in an e-mailed statement that day.
On Oct. 10, Unitech denied a report in the Hindustan Times that Standard Chartered Plc had withheld funds from the realty firm. Unitech hadn't accepted loans from Standard Chartered and the report is ``completely false,'' it said in a statement to the Bombay Stock Exchange.
To contact the reporter on this story: Saikat Chatterjee in New Delhi at schatterjee4@bloomberg.net.
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