TABLE OF CONTENT

Chapter No. Subject Page No.

1.0 Executive Summary 6

2.0 Introduction
a. Objectives 7
3.0 Industry Profile
a. Review of literature on the industry 8-11
b. Major Companies 11
c. Growth chart – past and projections for future 12-17
d. SWOT 18-19
4.0 Company Profile
a. Review of literature on the company 20-24
b. Historical analysis 25-27
c. Growth Chart – past and projections for future 28-29
d. SWOT 30-31
5.0 Issues and challenges facing the organization 31
6.0 Reflections on what has been learned during the 32-75
placement experience
7.0 Recommendations 76-77
8.0 Bibliography 78
9.0 Annexure 79-81
a. Tables
b. Graphs
10.0 Case Study 82-87
11.0 Synopsis of the project 88-89

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 Executive Summary

The project is about to understand how company manages to integrate the functions of
various departments. It explains specifically how finance department works in the
company and what major role it plays in the functioning of the company.

Further it describes how company manages to reduce its cost of borrowings by availing
different products available with banks. It also describes in detail how company
implements and introduces various checks and controls for controlling its major operating
costs.

This project also helps me understand the accounting procedures adopted by the company.
This will help in gaining knowledge about the surviving strategy that a company may use in
today’s cut throat competition and cost cuttings across the board.

This project enhances my skill of analyzing the financial position of the company, by
making comparative analysis of the various expenses incurred and income earned by the
company in the two consecutive financial years.

This helps me in understanding the working capital requirements of the company with the
help of ratio analysis. It explains how company manages its working capital cycle, what its
aspects are and what the approaches to the working capital handling are.
Also it describes the various factors that affect the working capital decisions to be taken in the
company and the various sources of financing working capital requirements. Also it includes the
ratio analysis of the company with the help of the comparative analysis of the two consecutive
years.

This project further helps me in understanding the inventory management, cash management,
and debtors/ receivable management of the company and how effectively they work on it.

In total, the project was a great learning experience about how a real estate concern deals
with all its finances and systems.

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 Objective of the Project

The objective of the project is to understand and learn the work process of finance and accounts
department in unitech corporate parks plc and to enhance my knowledge with a detailed study
and,

 To understand the major functions of finance & accounts department.

 To know the flow of work process through which these functions are carried out
efficiently.
 To understand the basics of finance & internal controls for a real estate concern.
 To understand the basics as to how a company can reduce its cost of borrowings by
availing different products available for banks
 To understand the accounting procedures & implementing various checks & controls for
operating costs.

 To study the fundamental analysis.

 To study real estate industry and its impact on Indian economy.

 Apart from this we intend to create a virtual portfolio for long term and short term
Investors.

Although the functions of the finance and accounts department have been explained with respect
to unitech in general, the project primarily covers in depth the various cost cutting efforts of the
company. The focus has been on working capital management, inventory management, and
receivable management.

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 INDUSTRY PROFILE

REVIEW OF LITERATURE OF THE INDUSTRY

REAL ESTATE INDUSTRY IN INDIA:

The Real Estate industry in the recent past has been synonym to success. The Real Estate
industry has been growing in the tough times and supported the Indian economy to an extent that
it today alone stands at the second position in Indian Economy. With large revenue of twelve
million dollars the Real Estate industry today is estimated to further expand at the rate of thirty
percent per annum. With such huge growth facts and figures, the Real Estate Industry has now
become a hub for all the aspiring professionals and attracts a large investment either long term or
short term. The Real state sector offers various services to the clients and to other industries that
revolve around the property. It seems to be have not possible if with the out the Real Estate
sector that we could enjoy the lavish apartments and excellent buildings for the various income
groups that we notice walking down the street today. It is further the bless of the Real Estate
Industry that we enjoy such marvelous Infrastructure, as the Infrastructure and the Real Estate
Industry goes hand in hand making the present India a viable destination for growth and
prospects of growth. The Real Estate Industry being the second largest industry in the Indian
economy salutes and grants an equal share of importance to the related industries who have
contributed in the making the Real Estate industry a promising industry for the Indian Economy
to Rely on. Hence all the aligned industries like Interior Designing, Architecture, Builders,
Manufacturers and other related fields are granted an equal importance and respect while one can
talk about the Real Estate sector alone.

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The Real Estate industry has contributed to the growth of the Indian economy without any doubt
but on the same hand they have also contributed to the growth of an individual by supporting
them with the excellent jobs in the sector and prompting the knowledge and expertise of the
existing key players in the market. Hence the Real Estate industry has played a dual role in the
growth factor as well apart from maintaining a large growth and development rate of India. It is
the real Estate Industry that has shaped previous India to a new aged modern India providing
excellent facility with the high technology mechanism with the vision of growth of the sector
with the growth of India. Today we find various sectors associating with the Real Estate that are
partly or completely responsible to work hand in hand with the Real Estate industry. To conclude
one can say that the Real Estate industry is blessed in the modern age to not only the human kind
but also to the nation. With tremendous growth and development it has signified itself to be a
potential sector that can grow and provide support to one and all with the services and
development in various methods and factors. The Real Estate industry aiming to gain the top
position would develop in the future economy time with aim to provide home by 2020, which is
also now an aim for largest year long festival of Real Estate, The Real India Fest.

Real estate is a business, not a profession. Real estate is sometimes inaccurately spoken of as a
profession, but it is essentially a business. A profession applies science, art or learning to the use
of others, the profit to the professor or person applying it being incidental; whereas a business is
engaged in primarily for profit, and the profit is to the one engaging in the business.

The Indian economy is steadily moving forward on its path to prosperity with economic
development being the focal point of the progress. In the post liberalization era, India has
attracted huge quantum of foreign direct investment on account of its excellent economic
performance and recently real estate sector has also been deregulated and liberalized. Today
India is seen as a prime destination for investment by overseas investors across the board. India's
favorable demographic and economic scenario makes it an attractive destination for the real
estate investors.

The current urbanization level at around 30% and provision of urban amenities, highlights the
strong future potential for growth of real estate and construction. The Indian real estate industry
is currently estimated to be US$16 billion, with a CAGR of 30 per cent. Real estate and
construction is emerging as a prominent sector for FDI investment in India. The total FDI inflow

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in real estate sector for FY2008 was US$1,866 million led by aggressive FDI investments in
retail projects, hospitality and SEZs including roads and highways.

COMMERCIAL REAL ESTATE OVERVIEW:

Commercial real estate is property used solely for business purposes. Office buildings, malls,
industrial parks, hotels, convenience stores, apartment complexes and gas stations are all
examples of commercial real estate.
Overview of Indian commercial Real Estate Sector

Top real estate developers are interested in to invest in Indian commercial real estate, targeting
the requirements of the high growth Indian IT and IT Enabled Services (“IT/ITES”) sectors. The
Company is focused on investment in Special Economic Zones (“SEZ’s”) dedicated to the
IT/ITES industries or IT Parks which are suitable for foreign direct investment.
These SEZ’s cater primarily to outsourced IT/ITES needs of large global companies. Given the
challenging economic environment most of these companies face, the outsourcing of IT/ITES
has slowed down considerably. Indian software services companies as well as the IT divisions of
global companies, who are real estate developers prime tenants, have significantly scaled back
expansion/outsourcing plans.This has adversely impacted demand for commercial real estate that
real estate companies is building. Whilst the rate of decline in GDP in the developed economies
is showing signs of levelling off, target clients of the Company have yet to translate this into
recommencement of their outsourcing plans. A protectionist environment in most developed
nations of the world, that has taken hold over the last year or so given the levels of
unemployment.

The primary growth driver of commercial real estate is the IT/ITES sector, which, is growing at
25 - 30per cent annually. India’s IT/ITES industry is expected to grow to US$148 billion by
2012 which translates into in excess of 250 million sq. ft of commercial office space requirement
by 2012 - 13. As per 2006 McKinsey-NASSCOM report, 18-20% of all IT demand is directed
towards the NCR (National Capital Region). Nearly 75% of office space in the NCR is occupied
by IT/ITES firms.

Recent Activity in the Office Market

Over the past several years, developers completed new buildings at an aggressive pace. 75
million square feet of office space scheduled for completion in 2008, an increase from 53 million
square feet built in 2007. However, as economic growth slowed throughout late 2007 and into
early 2008, demand for office space remained insufficient in most markets to absorb this new
development. For example, the national office vacancy rate increased from 12.5% to 12.6%.
Nevertheless, rents and occupancy rates continued to increase over the same time period in the
highly competitive markets of New York City, Boston, Houston, and Denver.

So although office landlords haven't dropped rent prices, they will have to find ways to retain
customers and attract new ones in an increasingly competitive market. Many firms have started
offering more concessions to clients, such as interior construction work and months of free rent.

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Effective rents, which take into account concessions such as a free month's rent upon signing a
lease, were flat or falling in 16 markets in the fourth quarter of 2007, compared with seven
markets in the third quarter.

Rent revenues and cash flow from commercial properties is therefore steady, but commercial
assets are falling in value. This is primarily because institutions have raised standards and slowed
their lending pace, and it is becoming more and more costly to finance the acquisition of
commercial properties. Many owners borrowed aggressively from 2005 to 2007, before the
residential housing slump, and these borrowers will need to refinance their loans soon. Some
won't be able to borrow as much or get the same terms, which puts them at risk of default.
Others, however, have seven- or even ten-year terms on their loans, and this time-frame offers
ample opportunity for the financial industry to resolve its issues and for the market to rebound.[

EXISTING PLAYERS IN REAL ESTATE INDUSTRY

Structure: Real estate is a highly fragmented sector with only a few organized players. Most real
estate developers have only a local or regional presence and there is moderate participation from
large corporations till now.

Followings are the existing players in the Indian real estate industry.

(1) KOLTE PATIL DEV.

(2) ORBIT CORPORATION

(3) PENINSULA LAND

(4) ACKRUTI CITY

(5) HDIL

(6) ANSAL PROPERTIES

(7) PARSVNATH DEVELOPERS

(8) ANANT RAJ INDUSTRY

(9) OMAXE

(10) DLF

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 (11) UNITECH

(12) PHOENIX MILLS

(13) GMR INFRASTRUCTURE

(14) IVRCL INFRA

GROWTH CHART- PAST AND PROJECTION FOR FUTURE

Over the past several years, developers completed new buildings at an aggressive pace. 75
million square feet of office space scheduled for completion in 2008, an increase from 53 million
square feet built in 2007. However, as economic growth slowed throughout late 2007 and into
early 2008, demand for office space remained insufficient in most markets to absorb this new
development. For example, the national office vacancy rate increased from 12.5% to 12.6%.
Nevertheless, rents and occupancy rates continued to increase over the same time period in the
highly competitive markets of New York City, Boston, Houston, and Denver.below are the
overview and growth chart of Indian office market at the major cities of india

1)Gurgaon Office Market

Overview

Gurgaon is the fastest growing town in the country and the pace of development has been so
rapid that it has been branded as the ‘Millennium City of India’. Gurgaon is an established
IT/ITES destination and also houses a number of non-IT majors. The biggest car and motorcycle
manufacturers in India, have their manufacturing plants in Gurgaon.

Preference for Gurgaon for setting up operation by IT majors has resulted in 17 notified IT/ITES
SEZs in the region by real estate majors. Gurgaon leads office space supply in the NCR with a
45% market share. Gurgaon market has also seen a demand for pure commercial office spaces
from all sectors. Approximately 30.2 mn sq ft of commercial office space (IT & Non-IT) is
expected to come up by 2012 - 13 in Gurgaon. The majority of the total proposed supply in
Gurgaon is expected to be operational by 2011 - 12. Bulk of the supply will be made available in
the numerous SEZ projects coming up.

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Rental and Capital Values

The IT/ITES space rentals vary as per the location of the projects within Gurgaon and are in the
range of Rs.40 to Rs.60 per sq ft per month. The rental is negotiable depending upon the space
requirement of the clients (warm shell, bare shell), location of the project, brand of the building
and other factors. The monthly CAM (common area maintenance) charges are between Rs.15 to
Rs.18 per sq ft per month.

2)Noida Office Market Overview

Overview

The city is the outsourcing hub for IT/ITES industry and is home to automobile ancillary units
andmanufacturing companies. Development of Taj corridor and development of huge SEZ and
IT parks has attracted huge foreign direct investments in the city.
NOIDA is emerging as a low-cost alternative to Delhi and Gurgaon, to become the next big
office destination. With cheaper land costs and the development of numerous high-profile
projects, the city is emerging as a viable alternative to Gurgaon. NOIDA currently caters to

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IT/ITES companies that operate from an independent or BTS (built-to-suit) development. Unlike
the Gurgaon commercial property market, where benchmark rates have been established by
developers, lease rentals of property in NOIDA vary extensively.

Demand for Grade A commercial space by IT/ITES companies has seen a constant growth. In
the past year, more multi tenanted developments have been announced and IT/ITES firms have
shown a positive response towards these developments.Approximately 2.8 mn sq ft of IT/ITES
office supply is expected to come up in Noida by the end of 2009 - 10. Further, it is expected that
by the end of 2011 - 12, Noida would witness a huge supply due to delay in the current
announced projects.

Rental and Capital Values

The commercial space rentals vary as per the location of the projects within NOIDA. In Sector-
62, rentals vary in the range of Rs.30 to Rs.35 per sq ft per month for IT spaces which are further
negotiable. The rentals for the commercial spaces are between Rs.60 and Rs.80 per sq ft per
month (not inclusive of CAM charges) while in Sector-125 and Sector-127, the IT space rentals
vary between Rs.35 and Rs.40 per sq ft per month (not inclusive of CAM charges). The monthly
CAM (common area maintenance) charges are between Rs.12 and Rs.15 per sq ft per month.

There has been a dip in the growth of the IT/ITES sector as a whole. Thus, the office space
values have seen a correction (of approximately 16 - 18%) in the rental as well as capital values.

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3) Greater Noida Office Market Overview

The Greater Noida office market is still at a nascent stage. Commercial space usage is dominated
by industries and so far, office market in the city is confined to knowledge parks and campus
development on individual land parcels. Very few office structures exist in the city itself.
There is a large quantum of IT space under construction on the Taj Expressway as well as along
the Greater Noida Expressway. The Tech Zone in Greater Noida (approx 300 acres) has a large
number of IT giants setting up shops. Approximately 2.55 mn sq ft of IT/ITES office space by
the end of 2009 - 10 in Greater Noida.

4) Kolkata Office Market Overview

overview

The Kolkata office market continues to be dominated by the IT/ITES sector which accounts for
almost 60% of the total real estate development in the city. Suburban locations of New Town
Rajarhat and Salt Lake Sector V are expected to meet the demand emanating from the IT/ITES
sector. Large space requirements of technology and IT sector has pushed the real estate growth
towards the suburban and peripheral areas of the city. Approximately 7,000 hectares of land in
possession of West Bengal Housing Infrastructure Development Corporation in Rajarhat has
been earmarked for residential/commercial and industrial space. Out of this approximately 200
acres of land has been earmarked for IT/ITES units. New Town (Rajarhat), in the east of
Kolkata, is being promoted as an IT hub. The government has allotted approximately 27.78 mn
sq ft of land area for the development of IT/ITES in New Town, Rajarhat. Kolkata market would
witness a huge office space supply (IT & Non IT) by 2010 - 11. Approximately 13.25 mn sq ft of
office space in Kolkata is expected to be operational by the end of 2010 - 11. Out of
this, 4.03 mn sq ft became operational in 2008-09. Approximately, 4.89 mn sq ft of IT/ITES
office space is expected to come up in Kolkata in 2010 - 11.

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Rental and Capital Values

The base rentals in the Central Business District (CBD) areas of Park Street, Camac Street are in
the range of Rs.85 - 90 per sq ft per month. However, rental values in the CBD location of
Dalhousie Square area are in the range of Rs.50 - 60 per sq ft per month. The prevailing rate in
Salt Lake, a preferred destination for the IT/ITES sector, ranges between Rs.40 - 45 per sq ft per
month. Rajarhat, being a peripheral location for the IT/ITES sector has average rental rates
ranging between Rs.30 – 35 per sq ft per month. The recent slowdown in the IT sector exerted a
downward pressure on rentals in the region of approximately 14 - 15%. With 18% correction, the
CBD area witnessed the maximum decrease in rental values in the first quarter. While prices
remained stable in Q2 2008, a major correction was witnessed during Q3 and Q4 across these
micro markets. An overall 25% - 30% correction in rentals has been witnessed since Q1 2008 -
09.

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Below mentioned is the state wise breakup of notified SEZs after coming into force of the
SEZ Act, as on 18th December 2008

A total of 14 SEZs in IT/ITeS sector have been granted notification by the Central
Government after July 2007. Three Unitech properties for IT sector have been granted SEZ
notification; two are in Gurgaon while two in NOIDA, one each in greater Noida, Kolkata,
and Hyderabad .The total number of notified SEZs pan-India has increased to 274 units till
December 18, 2008, post the SEZ Act in 2005.

Sector-wise distribution of the SEZs is reflected in the chart below:

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Key Growth Drivers

The propellants for the commercial real estate sector are

 Growth of IT/ITES sector creating demand for commercial parks

 Strong demographic impetus: India has the second largest population in the world and the
growth rate of population is still rapid.
 Rising FDI levels has increased commercial space requirements by foreign firms.
 Expansion of organized retail sector.
 Easy availability of finance.

SWOT ANALYSIS OF COMMERCIAL REAL ESTATE INDUSTRY

Study of the factors which may have an impact on business or industry either in a positive or in a
negative way.

STRENGTH

 employment and training opportunities in the field of construction.

 Private sector housing boom and commercial building demands.

 Construction of the multi building projects on the feasible

locations in the country.

 Good structured national network facilitates the boom of construction industry.

 Low cost well- educated and skilled labour force is now widely available across the
country.

 Sufficient availability of raw material and natural resources in the country is supportive
for the industry.

WEAKNESSES

 Distance between construction projects reduces business efficiency.

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  Training itself has become a challenge.

 Changing skills requirements and an ageing workforce may accentuate the skills gap.

 Improve in long-term career prospects is highly required to encourage staff retention and
new entrants.

 External allocation of large contracts becomes difficult.

 Lack of clearly define processes and procedures for construction and its management.

 Huge amount of money need to be invested in this industry and towards construction.

OPPORTUNITIES

 continuous growth in IT/ITES sector or or IT Parks for foreign direct investment will
create more construction opportunities.

 Developing supply chain through involvement in large projects is likely to enhance the
chances in construction.

 Public sector projects through Public Private Partnerships will bring further opportunities.

 Renewable energy projects will offer opportunities to develop skills and capacity in new
markets.

 Financial supports like loan and insurance and growth in income of people is in support
of construction industry.

 Remote areas in the country are easily accessible and plenty of land is available in the
country.

THREATS

 Long term market instability and uncertainty may damage the opportunities and prevent
the expansion of training and development facilities.

 Current economic situation may have an adverse impact on construction industry.

 Political and security conditions in the region and Late legislative enforcement measures
are always threats to any industry in India.

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  Infrastructure safety is a challenging task in construction industry.

 Lack of political willingness and support on promoting new strategies

 Natural abnormal casualties such as earth quake and floods are uncertain and can prevent
the construction boom. Inefficient accessibility in planning and concerning the
infrastructure and signs.

 Competitors are emerging in the industry by leaps and bounds.

COMPANY PROFILE

UNITECH CORPORATE PARKS PLC

COMPANY REVIEW OF LITERATURE

Unitech Corporate Parks PLC- SPONSERED BY UNITECH

UNITECH GROUP

Unitech Limited, India's leading Real Estate and Infrastructure Company was
established in February 1971 as United Technical Consultants Pvt. Ltd and was than
converted into a public limited company in October 1971.

Unitech is one of the leading real estate developer in India. Unitech's real estate portfolio
encompasses the development of integrated townships, residential complexes, commercial office
space, IT Parks and SEZ developments, retail developments, hotels and amusement parks. From
its beginnings as a real estate developer focusing on the NCR, the Unitech Group has expanded

16
its operations to other major cities in India including Kolkata, Hyderabad, Bangalore, Kochi,
Chennai, Lucknow, Varanasi, Chandigarh and Agra.

India's leading Real Estate Developer

Established in 1971, Unitech today is India's leading real estate company with projects across the
country. Unitech is known for the quality of its products and is the first real estate developer to
have been certified ISO 9001:2000 certificate in North India. The Unitech brand is well
recognised in India and was once again conferred with the title of “Superbrand” by Superbrand
India in 2010. Unitech has the most diversified product mix comprising Residential,
Commercial/Information Technology (IT) Parks, Retail, Hotel, Amusement Parks and Special
Economic Zones (SEZ).

The Company is also the recipient of the CW Architect and Builders Award, 2008 for being one
of India's Top Ten Builders. Unitech has long partnered with Internationally acclaimed architects
and design consultants including SOM(USA), BDP(UK), Maunsell AECOM(HK), MEA
Systra(France), Callison Inc.(USA), FORREC(Canada), SWA and HOK(USA) for various
projects.

Unitech's clientele for commercial projects includes global leaders such as Fidelity, McKinsey,
Bank of America, Ford Motors, Nike, EDS, Hewitt, Amdocs, Ernst & Young, Reebok, Keane,
Seagrams, Perfetti, Exxon Mobile and AT Kearney.

Unitech Ltd. and Norway Based Telenor Group (6th Largest Mobile Communication Provider in
the world) came together to build UNINOR - a telecommunication service company and is
providing GSM services in 22 circles across India.

Key Investment Rationale

Pan-India residential real-estate developer focused on affordable housing Unitech is one of

India’s largest pan-India residential developers. The company concentrated on higher – margin,
non-residential segment and monetized some of its IT parks/ SEZs when the economic was its
peak. With the downturn in the markets the company shifted its focus on the residential projects
mainly in the affordable and mid housing segments.

Unitech’s consolidated revenue increased 46.2% q-o-q to Rs. 1,132.5 crore, ahead of our
expectations for Q4FY10. The company sold a total of 3.46 mn sq ft in Q4FY10, of which 2.78
mn sq ft (~80%) was in the residential segment. The total revenue for FY10 stood at Rs. 2,913.3
crore against Rs. 2,889.7 crore in FY09, a marginal increase of 1.44% y-o-y. EBIDTA stood at
Rs. 272.5 crore in Q4FY10, up 116.5% y-o-y and 46.8% q-o-q. In Q4FY10, operating margin
declined to 24.1% from 32.7% in Q4FY09, mainly on account of higher construction cost.
Further, profitability was also impacted by change the product mix – increased focus towards

17
the affordable housing segment.

Restructuring plans

Unitech is demerging its infrastructure business and list it separately as Unitech Corporate Park
(UCP). UCP will include general construction, SEZs/ IT parks, industrial parks, township
management etc. Unitech will be the largest shareholder with 35% stake in UCP, 33.3% will be
offered to investors and balance 31.7% will be with the promoters. The existing Unitech
shareholders will receive one share of UCP for every share held by them. We believe the
restructuring exercise would be positive on account of – 1) It would allow shareholder’s to
choose between real estate and infrastructure businesses; 2) It would unlock value of the non-
core businesses; 3) Infrastructure business could avail of financing on favorable terms (as
compared to real estate projects).

Unitech Corporate Parks PLC

Company Information

Unitech Limited
Corporate Office Registered Office
Unitech House L Block, Unitech Limited
South City - 1, Gurgaon - 122001 6 Community Centre, Saket,

Tel: +91.124.4125200, 4125328 New Delhi - 17, India

Tel: +91.11.41664040

Fax: +91.11.2685.7338

Marketing Office

Unitech Signature Towers,

GF South City-I, NH-8,

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Gurgaon - 122001,
Haryana, India
Sales queries: +91.124.455.2000
Fax: +91.124.408.3355
Email: marketing@unitechgroup.com

Management

The management of UCP vests in its Board of Directors, which is responsible for the overall
management of the Company and the group as well as the formulation and implementation of the
Company's investment strategy.

Directors (all non-executive; * independent)

Atul Kapur *- Chairman

Aubrey John Adams *

Ajay Chandra

Mohammad Yousuf Khan *

Donald Lake *

Vision

To be India’s leading Real Estate company with a Pan-India Footprint, and be the company of
first choice amongst our customers to address their needs across all realty verticals.

Mission

To satisfy every customer’s need for a better experience through quality construction and
employee contentment. Unitech has a well-managed architectural and engineering team that has
closely partnered and worked with internationally acclaimed architects and many others, to
achieve both aesthetic and efficient designs. We are a customer oriented company and we
believe in putting in our best foot forward in our journey to the pinnacle.

OVERVIEW

Unitech Corporate Parks Plc ("UCP") was incorporated in the Isle of Man on 6th September
2006, with the initial business strategy of making investment(s), in Indian commercial real estate,
that is being developed specifically for the high growth IT (Information Technology) and ITES
(Information Technology Enabled Services) sectors and Scope expanded to include retail and
hospitality sectors in India

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UCP raised an amount of approximately GB £ 360 Million by issuing and placing its Ordinary
Shares at AIM of London Stock Exchange Plc., on 20th December 2006 was invested to acquire
majority stakes in six seed portfolio assets Portfolio currently comprises of over 21 million sq ft
of potential leasable area across six projects in strategic locations Unitech to co-invest in all
projects along with UCP, with UCP acquiring control. It targets developments which could
generate a project level IRR of at least 25%

Strategy

UCP's business strategy is to make investment(s) in commercial real estate in India which is
being developed specifically for the high growth IT (Information Technology) and ITES
(Information Technology Enabled Services) sectors.

UCP was formed to invest in Indian commercial real estate, targeting the requirements of the
high growth Indian IT and IT Enabled Services (“IT/ITES”) sectors. The Company is focused on
investment in Special Economic Zones (“SEZ’s”) dedicated to the IT/ITES industries or IT Parks
which are suitable for foreign direct investment. These SEZ’s cater primarily to outsourced
IT/ITES needs of large global companies. Given the challenging economic environment most of
these companies face, the outsourcing of IT/ITES has slowed down considerably. Indian
software services companies as well as the IT divisions of global companies, who are UCP’s
prime tenants, have significantly scaled back expansion/outsourcing plans. This has adversely
impacted demand for commercial real estate that UCP is building. Whilst the rate of decline in
GDP in the developed economies is showing signs of levelling off, target clients of the Company
have yet to translate this into recommencement of their outsourcing plans. A protectionist
environment in most developed nations of the world, that has taken hold over the last year or so
given the levels of unemployment in these countries, also is not conducive for a return to growth
for the IT/ITES industry.We feel that as the developed economies emerge from the current
recessionary environment, the attractiveness of outsourcing IT/ITES in India will become
apparent again. The issue is one of timing rather than a fundamental change in the prospects of
such services. Even under these conditions, I am pleased to say that we have made positive
progress on the continued development of our assets, particularly at InfoSpace, Dundahera,
Gurgaon (“G2-IST”) and InfoSpace, Kolkata (“K1”) which has had new lettings signed during
the period. Additionally, thelocal knowledge and experience of Nectrus Limited, UCP’s
investment manager, and Unitech, our project manager, combined with the international
expertise and capabilities of our external consultants, has created an unrivalled team to plan,
design, and undertake the development of the portfolio and future pipeline assets. We have also
advanced our marketing initiatives and benchmarking studies to strengthen client relationships
through customer relationship management. On top of this, sophisticated analysis and value
engineering of the construction process is yielding savings in construction costs. We feel
confident that once the economic cycle turns and demand for IT/ITES recovers, our portfolio of
assets is ideally positioned to benefit from such a recovery.

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Outlook

Over the short term, given the macro economic conditions in the developed economies of the
world, the demand for IT/ITES commercial real estate in SEZ’s in India is likely to remain soft.
In addition, the Government of India in its Union Budget 2009 - 10 has extended the sunset
period for the IT Parks Scheme by another year, until the financial year 2012. This is also likely
to have an adverse impact on the movement of tenants from such IT Parks to SEZ’s. However,
we feel that the benefits of outsourcing IT/ITES to India are proven and continue to be very
attractive. Over the medium term as the economic cycle in the developed economies turns and
the demand for IT/ITES recovers, our portfolio is ideally positioned to benefit from such a
recovery. Meanwhile through a variety of measures that include a) pacing of the capital
expenditure to operationalize cold shells to match real demand, b) extracting savings in
construction costs through design optimization and c) strengthening client relationships we feel
confident in delivering superior products to our clients and economic returns to our shareholders

HISTORICAL ANALYSIS

Key Milestones
The key milestones achieved by the company since incorporation are given in the table below:

Timelin
Milestone / Event
e
-          Forays into Telecom
2008
-          Expanded into the Mumbai market
-          Commenced operations in UAE (Dubai)
2007
-          Awarded title of Superbrand by Superbrand India
2006 -          Won biggest land deal in India, 343 acres of prime land in Noida

21
 -          Awarded Chandigarh Amusement Park project
-          Entered Kolkata
2005
-          Awarded the title of Business Superbrand
2004 -          Expanded into Greater Noida, U.P
-          Launched the first mega residential project, Uniworld City in Gurgaon
2003
-          Entered Noida, U.P
1998 -          Awarded the ISO 9002 certification
1996 -          Constructed the Radisson Hotel, Delhi
1992 -          Consolidated in Gurgaon with South City-I
1988 -          Entered Bangalore
1987 -          Entered Lucknow and Mumbai
1986 -          Ventured into real estate and started shaping Gurgaon, Haryana
1978 -          First international project in Iraq and Libya
1975 -          Diversified into construction
1972 -          Started out as a company dealing in soil mechanics

22
BusinessAreas

In a short span of time, Unitech has carved a special niche for itself in the real state sector of the
country. Apart from its residential and commercial housing projects, Unitech is also involved in
the construction of flyovers, highways, city roads, power houses, refineries, transmission lines,
airports, educational institutions, hotels, hospitals etc. It is also the leader in the domain of
building amusement parks in and around Delhi. In merely 30 years of its existence, Unitech has
diversified in various sector successfully.

23
MajorProjects

Unitech has a list of successful projects in cities like Mumbai, Delhi, Kolkata, Chennai,
Hyderabad, Bangalore, Kochi, Noida, Greater Noida, Agra, Lucknow, Varanasi,Gurgaon, and
Ghaziabad. Some of its well known residential projects are the Heritage Estate Yelahanka, Deja
View, Deja View Park residential, Terrace Garden, Parkway, and Windsor Court in Bangalore,
West End Vihar in Mumbai, Uniworld City and the Gateway are the projects in Kolkata, the
Legacy, Heritage, South City residential projects in Lucknow. Apart from the residential
projects, Unitech has also proved its mettle in commercial projects.

24
GROWTH CHART- PAST AND PROJECTIONS FOR FUTURE

Projects of UCP
UCP intends to co-invest along with Unitech Limited and its affiliates ("Unitech Group"), which
is one of India's leading developer.   The Unitech Group will provide investment advisory
services to UCP and also render project management services to the Seed Portfolio projects. As a
result of these arrangements, UCP will have access to the considerable experience of the Unitech
Group.   Tracking its history back to 1971, Unitech Group's has over 30 years' experience in the
construction and real estate development business in India. Unitech Limited is listed on the
Bombay Stock Exchange Limited and the National Stock Exchange Limited in India. The
Unitech Group's real estate portfolio encompasses the development of integrated townships,
residential complexes, commercial office space, IT Parks and SEZ developments, retail
developments, hotels and amusement parks. From its beginnings as a real estate developer
focusing on the NCR, the Unitech Group has expanded its operations to other major cities in
India including Kolkata, Hyderabad, Bangalore, Kochi, Chennai, Lucknow, Varanasi,
Chandigarh and Agra.

Following admission, UCP has invested the proceeds in the following seed portfolio projects,
comprising of six IT or ITES related projects, five of which are located in the National Capital
Region ("NCR", being the area surrounding Delhi, India) and one of which is located in Kolkata,
India.  

(a) Infospace, Gurgaon(G1-ITC);

(b) Infospace, Dundahera, Gurgaon(G2-IST)
(c) Infospace, Sector 62, Noida(N1)
(d) Infospace, Sector 135, Noida(N2);
(e) Infospace, Greater Noida(N3) ;
(f) Infospace, Kolkata(K1)      

The NCR is one of the India's main IT and ITES hub and Kolkata is an emerging IT / business
processing outsource ("BPO") centre with considerable growth potential. The NCR has
historically been the focus of both Indian companies and the Indian operations of major foreign
companies.   The seed portfolio projects are expected to have a total leasable area of 21.5 million
sq. ft. upon completion. The market value of the seed portfolio projects has been assessed by
Jones Lang Laselle to be INR 41,373,000,000 (GBP 481.47 million) as at 8 November 2006.  
The investments in the Indian companies owning the seed portfolio projects ("Indian Project
SPVs") have been made by UCP through two tier wholly owned subsidiaries in Mauritius
("Mauritian SPVs"). The Mauritian SPVs have acquired sixty percent majority stake in the
Indian Project SPVs. These investments account for all of proceeds of the placing (net of

25
expenses incurred in connection with the placing and reserves for certain ongoing business
expenses).   Unitech Group holds a minority stake in the seed portfolio projects.   UCP also has
the right to enter into similar co-investment along with Unitech Group in future, subject to
certain conditions.

Infospace, Gurgaon (G1-ITC) Infospace, Dundahera,

Gurgaon (G2-IST)

Infospace, Sector 62, Noida (N1) Infospace, Sector 135,

Noida (N2)

26
SWOT ANALYSIS

STRENGTH

 UCP plc has a very good market share of about 54%

 Brand Value

 Huge supplier base ensures a fixed raw material cost

 A well established and firm base in north India

WEEKNESS

 Little or no projects in the other parts of India

 No parallel products to support during times of bad economy

OPPORTUNITIES

 Expansion of business in other parts of India

 It can invest more in Power generation projects like Hydroelectric or Wind power

 Investment in raw material – Backward Vertical Integration

THREATS

A) THREATS OF NEW ENTRANTS

 Decrease in profitability due to increase in number of entrants.

 Real Estate Sector needs high working capital.

 This results in high entry barriers.

 Existing firm has an edge over the others due to more industrial experience.

27
B) THREATS OF ESTABLISHED RIVALS

 High competition in the sector.

 Established rivals are a threat to upcoming players.

 DLF ,Unitech and Ansals are the major players in this sector.

28
Reflections on what has been learned during the placement
experience

Working Capital Management

WORKING CAPITAL

Working capital is a financial metric which represents the amount of day-by-day operating

liquidity available to a business. Also known as operating capital, it is calculated as current

assets minus current liabilities. A company can be endowed with assets and profitability, but

short of liquidity, if these assets cannot readily be converted into cash.

Working capital refers to the investment in current assets such as investment in raw materials,

stock of finished goods, etc. Working capital is used to meet the day-to-day requirements of a

business. Current assets are required for effective and efficient use of fixed assets. For the

investment in procurement of raw materials, funds are locked up in debtors, cash and banks,

prepaid expenditure, etc. is recognized as working capital.

ASPECTS OF WORKING CAPITAL

1) Gross Working Capital = Total of Current Asset

2) Net Working Capital = Excess of Current Asset over Current Liability

29
WORKING CAPITAL POLICIES

There are three possible approaches:

Aggressive Moderate Conservative

Cash Minimum holding Prepared to hold Prepared to hold idle

some cash balances

precautionary

balances

Debtors and stock Minimum Moderate levels High stock and

consistent with debtors level to

business needs maximize sales

Creditors Maximum Moderate level Low level seeking

available
discounts and

without reputation

compromising
for good payment

business needs

Future cash flows Predictable Reasonably Unpredictable

predictable

30
 WORKING CAPITAL POLICIES
Conservative policy

Cost Moderate
of policy
Asse
ts Aggressive
policy

Sale
s

WORKING CAPITAL MANAGEMENT

31
Decisions relating to working capital and short term financing are referred to as working capital

management. These involve managing the relationship between a firm's short-term assets and its

short-term liabilities.

The goal of Working capital management is to ensure that the firm is able to continue its

operations and that it has sufficient cash flow to satisfy both maturing short-term debt and

upcoming operational expenses.

Decision criteria

By definition, Working capital management entails short term decisions - generally, relating to

the next one year period - which is "reversible". These decisions are therefore not taken on the

same basis as Capital Investment Decisions (NPV or related, as above) rather they will be based

on cash flows and / or profitability.

(1) Cash conversion cycle,

(2) Return on capital (ROC).

(3) Return on equity

(4) Economic value added (EVA).

(1) CASH CONVERSION CYCLE

The cash conversion cycle is a measure of working capital efficiency, often giving valuable clues

about the underlying health of a business. The cycle measures the average number of days that

32
working capital is invested in the operating cycle. It starts by adding days inventory outstanding

(DIO) to days sales outstanding (DSO). This is because a company "invests" its cash to

acquire/build inventory, but does not collect cash until the inventory is sold and the accounts

receivable are finally collected.

Receivables are essentially loans extended to customers that consume working capital; therefore,

greater levels of DIO and DSO consume more working capital. However, days payable

outstanding (DPO), which essentially represent loans from vendors to the company, are

subtracted to help offset working capital needs. In summary, the cash conversion cycle is

measured in days and equals DIO + DSO – DPO:

Cash Conversion Cycle = Average Stockholding Period (in days) + Average Receivables

Processing Period (in days) - Average Payables Processing Period (in days) with:

(2) RETURN ON CAPITAL

In economics, return on capital, also known as return on invested capital, is a non-GAAP

financial measure that quantifies how well a company generates cash flow relative to the capital

33
it has invested in its business. It is defined as Net operating profit less adjusted taxes divided by

invested capital and is usually expressed as a percentage. In this calculation, capital invested

includes all monetary capital invested: shareholders' equity plus financial debt.

(3) RETURN ON EQUITY

Return on Equity (ROE, Return on average common equity, return on net worth) measures the

rate of return on the ownership interest (shareholders' equity) of the common stock owners. ROE

is viewed as one of the most important financial ratios. It measures a firm's efficiency at

generating profits from every dollar of net assets, and shows how well a company uses

investment dollars to generate earnings growth. ROE is equal to a fiscal year's net income (after

preferred stock dividends but before common stock dividends) divided by total equity (excluding

preferred shares), expressed as a percentage.

(4) ECONOMIC VALUE ADDED

(EVA) is an estimate of true economic profit after making corrective adjustments to GAAP

accounting, including deducting the opportunity cost of equity capital. EVA can be measured as

Net Operating Profit After Taxes (or NOPAT) less the money cost of capital. Money cost of

capital refers to the amount of money rather than the proportional rate (cost of capital). The

amortization of goodwill or capitalization of brand advertising and other similar adjustments are

the translations that occur to Economic Profit to make it EVA.

Working Capital Cycle

34
Cash flows in a cycle into, around and out of a business. It is the business's life blood and every

manager's primary task is to help keep it flowing and to use the cash flow to generate profits. If a

business is operating profitably, then it should, in theory, generate cash surpluses. If it doesn't

generate surpluses, the business will eventually run out of cash and expire. The faster a business

expands the more cash it will need for working capital and investment. The cheapest and best

sources of cash exist as working capital right within business. There are two elements in the

business cycle that absorb cash - Inventory (stocks and work-in-progress) and Receivables

(debtors owing you money). The main sources of cash are Payables (your creditors) and Equity

and Loans.

Each component of working capital (namely inventory, receivables and payables) has two

dimensions ........TIME ......... and MONEY.

WORKING CAPITAL FINANCING 

The need for financing arises in working capital because of investment in current assets and

current liabilities. Working capital requirements/ current assets are financed by a combination of

35
long term and short-term sources. The important tradition of short-term sources of current assets

financing are trade credit and bank credits. The two newly emerged sources of working capital

are factoring and commercial papers.

Working capital Financing at UNITECH CORPORATE PARKS PLC.

For financing temporary requirement of working capital, the organization goes for many sources,

Such as:

Trade Credit- When the company buys the raw material from the suppliers on credit basis, it

gets the raw material for utilization immediately with the facility to make the payment at a

delayed time. By accepting the delayed payment, the suppliers of raw material finance the

requirement of working capital.

Trade credit refers to the credit that a customer gets from suppliers of goods and services in the

normal course of business/ sale / transaction of the firm. In practice, cash is not paid immediately

for purchases but after an agreed period of time. Thus the deferral of payment is a major source

of finance for credit purchases. 

The features of trade credit are as follows as:

1.  It is an informal arrangement between the buyer and seller.

2.  There are no legal instruments / acknowledgement of debt which are granted on an open

basis. Such a credit appears in the records of the buyer of goods as sundry creditors / accounts

payable.

36
Trade credit may also in the form of bills payable. When the buyer signs a bill – a negotiable

instrument – to obtain a credit, it appears on the buyer’s balance sheet as bills payable. The bill

has a specified feature date, and is, usually used when the supplier is less sure about the buyer’s

willingness and ability to pay, or when the supplier wants to pay, or when the supplier wants the

cash by discounting the bill from a bank. A bill is a formal acknowledgement of an obligation to

repay the outstanding amount.

The advantages of trade credit are as follows: -

i) Easy Availability

It is very easy to obtain and also almost automatic and doesn’t require negotiations. The

easy availability is particularly important to small firms, which generally face difficulty in

raising funds from the capital market. 

ii)  Flexibility

Flexibility is another advantage of trade credit. Trade credit grows with the growth in firm’s

sales. The expansion in the firm’s sales causes its purchases of goods and services to increase,

which is automatically financed by trade credit.

iii)      Informality:

Trade credit is an informal, negotiations and formal agreement. It doesn’t have the restrictions,

which are usually parts of negotiated source of finance.

Bank Guarantees- Bank guarantees are the most commonly used source of financing working

capital

37
Letter of Credit- It is regularly used in the company to pay the exporter or accept the bills or

drafts drawn by the exporter on the exporter fulfilling the terms and conditions specified in the

letter of credit.

In addition to above, company also uses cash credit, bills purchase/discounted, working capital

term loans and packing credit facilities of the bank. It is an indirect form of working capital

financing and banks assume only the risk, credit being provided by the supplier himself. The

purchaser of goods on credit obtains a letter of credit from a bank. The bank takes the

responsibilities to make the payment to the credit in case the buyer fails to meet his obligations.

CASH MANAGEMENT

INTRODUCTION

Cash management identifies the cash balance which allows the business to meet day to day

expenses, but reduces cash holding costs.

Cash management is one of the key areas of working capital management. Apart from the fact

that it is the most liquid current asset, cash is the common denominator to which all current

assets can be reduced because the other major liquid assets, that is; receivables and inventory get

eventually converted into cash. This underlines the significance of cash management.

OBJECTIVES OF CASH MANAGEMENT

 The basic objectives of cash management are two-fold:

(a)    To meet the cash disbursement needs (payment schedule); and

(b)   To maintain minimum cash reserve

38
 These are conflicting and mutually contradictory and the task of cash management is to

reconcile them.

CASH MANAGEMENT TECHNIQUES

The following is a list of services generally offered by banks and utilised by larger businesses

and corporations:

1) Account Reconcilement Services: Balancing a checkbook can be a difficult process for a

very large business, since it issues so many checks that it can take a lot of human monitoring to

understand which checks have not cleared and therefore what the company's true balance is. To

get around this, banks have developed a system which allows companies to upload a list of all

the checks that they issue on a daily basis, so that at the end of the month the bank statement will

show not only which checks have cleared, but also which have not

2) Advanced Web Services: Most banks have an Internet-based system which is more advanced

than the one available to consumers. This enables managers to create and authorize special

internal logon credentials, allowing employees to send wires and access other cash management

features normally not found on the consumer web site.

3) Automated Clearing House: services are usually offered by the cash management division of

a bank. The Automated Clearing House is an electronic system used to transfer funds between

banks. Companies use this to pay others, especially employees (this is how direct deposit works).

Certain companies also use it to collect funds from customers (this is generally how automatic

payment plans work).

39
4) Balance Reporting Services: Corporate clients who actively manage their cash balances

usually subscribe to secure web-based reporting of their account and transaction information at

their lead bank. These sophisticated compilations of banking activity may include balances in

foreign currencies, as well as those at other banks. They include information on cash postitions

as well as 'float' (e.g., checks in the process of collection). Finally, they offer transaction-specific

details on all forms of payment activity, including deposits, checks, wire transfers, ACH

(automated clearinghouse debits and credits), investments, etc.

5) Cash Concentration Services: Large or national chain retailers often are in areas where their

primary bank does not have branches. Therefore, they open bank accounts at various local banks

in the area. To prevent funds in these accounts from being idle and not earning sufficient interest,

many of these companies have an agreement set with their primary bank, whereby their primary

bank uses the Automated Clearing House to electronically "pull" the money from these banks

into a single interest-bearing bank account.

6) Lockbox services: Often companies (such as utilities) which receive a large number of

payments via checks in the mail have the bank set up a post office box for them, open their mail,

and deposit any checks found. This is referred to as a "lockbox" service.

7) Positive Pay: Positive pay is a service whereby the company electronically shares its check

register of all written checks with the bank. The bank therefore will only pay checks listed in that

register, with exactly the same specifications as listed in the register (amount, payee, serial

number, etc.). This system dramatically reduces check fraud.

Cash Management at Unitech Corporate Parks PLC

40
Unitech Corporate Parks PLC works on four principles to manage its cash transactions

A. Accelerate Cash Collections:

1) As far as possible it insists upon the payment from the customer in the safe modes

like demand drafts, letter of credit, preaccepted hundies/ bills of exchange etc.

2) Allowing the cash discounts is the best way that it uses to induce the customer to

make prompt payments.

3) Concentration banking system of cash management is also used by the company.

B. Delay Cash Payments

Attempts are made by the company to get the maximum credit for the goods or service

supplied to it. It avoids early payments in order to get cash discounts.

C. Maintenance of optimum cash balance

Company does it with the help of cash budget. By preparing the cash budget in a proper

way, the company can have an idea in advance of the timing and quantum of excess

availability of cash or shortage of cash.

D. Investment of Excess Cash Balance

Company, in order to avoid keeping the excess cash balances, thinks about the possibility

of investing the excess cash balance on short term basis. Company, in order to avoid

keeping the excess cash balances, thinks about the possibility of investing the excess cash

balance on short term basis.

41
INVENTORY MANAGEMENT

Inventory management identifies the level of inventory which allows for uninterrupted

production but reduces the investment in raw materials - and minimizes reordering costs - and

hence increases cash flow;

Purchase, production and sale departments are mainly concerned with the management of

inventories. Their officials always try to have large stocks of inventories to facilitate production

and marketing of the product .It requires large amount of investment in inventories, and shall

increase the cost of the product by the amount of interest payable on such investment .It is,

therefore, the prime responsibility of the financial executives to have a proper management and

control over the investment in inventories so that it should not be unprofitable for the business

.For this purpose, financial management should take care of the maximum and minimum limits

of stock of inventories in the business to have a continuity in production process .

ASPECTS OF INVENTORY MANAGEMENT

42
(i)  Size of inventory – Maximum and minimum level,

(ii) Establishing timing schedules, procedures, and lot of sizes for new orders,

(iii) Ascertaining minimum safety levels

(iv) Coordinating sales, production and inventory policies;

(v) Providing proper storage facilities

(vi) Arranging the receipts, disbursements and procurement of materials and

developing the forms of recording these transactions;

(vii) Assigning responsibilities for carrying out inventory control functions; and

(viii) Providing the report necessary for supervising the over all activity.

 OBJECTIVES OF INVENTORY MANAGEMENT

 Inventory management has become unavoidable in the present day manufacturing process. The

basic managerial objectives of inventory control are two fold: - First to avoid over investment

and under investment in inventories and the Second to provide the right quantity of goods of

right quality at proper time and at proper value. The objectives of inventory management may be

discussed under two heads

(A) Operating Objectives 

1. Availability of Materials.

2. Minimizing the Wastage.

3. Promotion of Manufacturing Efficiency.

4. Better Service to Customers.

5. Optimal Level of Inventories.

(B) Financial Objectives 

43
 1. Economy in Purchasing.

2. Optimum Investment and Efficient Use of Capital.

3. Reasonable Price.

4. Minimizing Costs.

TECHNIQUES OF INVENTORY MANAGEMENT

(i) Supply chain management;

(ii) Just in Time (JIT)

(iii) Economic order quantity (EOQ)

(iv) Economic production quantity (EPQ).

(i) SUPPLY CHAIN MANAGEMENT (SCM)

Supply chain management is the process of planning, implementing, and controlling the

operations of the supply chain with the purpose to satisfy customer requirements as efficiently as

possible. Supply chain management spans all movement and storage of raw materials, work-in-

process inventory, and finished goods from point-of-origin to point-of-consumption.

The management of the inventory in the supply chain involves managing the physical quantities

as well as the costing of the goods as it flows through the supply chain.

In managing the Cost Prices of the goods through out the supply chain, several costing methods

are employed...

1. Weighted Average Price method

2. FIFO (First In First Out) method

44
 3. LIFO (Last In First Out) method
4. LPP (Last Purchase Price) method

(ii) JUST IN TIME (JIT)

Just-in-time inventory system is designed to ensure that materials or supplies arrive at a facility

just when they are needed so that storage and holding costs are minimized. The just-in-time

system requires considerable cooperation between the supplier and the customer. The customer

must specify what will be needed, when, and in what amounts. The supplier must be sure that the

right supplies arrive at the agreed-on time and location.

(iii) ECONOMIC ORDER QUANTITY (EQM)

Economic order quantity (also known as the Wilson EOQ Model or simply the EOQ Model) is a

model that defines the optimal quantity to order that minimizes total variable costs required to

order and hold inventory.

(iv) ECONOMIC PRODUCTION QUANTITY

Economic Production Quantity model (also known as the EPQ model) is an extension of the

Economic Order Quantity model. The difference being that the EPQ model assumes orders are

received incrementally during the production process. The function of this model is to balance

the inventory holding cost and the average fixed ordering cost.

(v) FIXATION OF INVENTORY LEVELS

45
It facilitates initiating of proper action in respect of the various materials in time so that the

various materials may be controlled in a proper way. The various levels which can be fixed are

as follows:

1) Maximum Level

2) Minimum Level

3) Re-order Level

4) Danger Level

(vi) BILL OF MATERIALS

A bill of material is the list of all the materials required for a job, process or production order. It

gives the details of the necessary materials as well as the quantity of each item. As soon as the

order for the job is received, bill of materials is prepared by Production Department or

Production Planning Department.

 
 
  BILL OF MATERIAL    
No. Date of Issue Production/ Job Order No.
   
Department Authorised              
S. Description of
No. Material code no. qty. for department use only  
remark
            MRN No. Date Quantity s
                Demande  

46
 d
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   

INVENTORY MANAGEMENT AT Unitech Corporate Parks PLC

Inventory is procured as required and demanded by various departments. No inventory control

technique is followed in inventory management system.

In case of Unitech Corporate Parks PLC, for managing the Cost Prices of the finished goods

through out the supply chain, FIFO method is employed i.e. the inventory that comes first will be

sold first. FIFO rate is calculated for the raw materials.

In case of Raw Materials, reorder Level is calculated i.e. it is the level falling in betwee the two

existences of maximum level and minimum level and is fixed in such a way that the

requirements of production are met properly till the new lot of material is received.

Also bill of material is also prepared by the production deparment whenever a new order is

received. With the help of this, indication can be given about the materials to be purchased by

the purchase department if the same is not available with the stores. It serves as a base for the

production department for placing the material requisition slips.

47
DEBTOR/ RECEIVABLE MANAGEMENT

Selling goods on credit is the most prominent force of the modern business. The firm adopts this

method of selling goods to protect it from the competitors and to attract the customers to buy its

products at favorable terms. When firm sells gods or services on deferred payment basis, it is

said that the firm has granted trade credit to customers.

Trade credit, in other words, is known as receivables or book – debt.

TECHNIQUES OF RECEIVABLES MANAGEMENT

Following techniques need to be studied in detail

48
 1) Credit policy

2) Discounts and allowances.

1) CREDIT POLICY:

The purpose of a credit policy is to ensure that everyone within a company understands the

working procedure of credit sales, and, of course, to exhibit financial control over a contentious

subject. The following policy has not been written with any business/industry/country in

particular, as such, it can only be used as information and not a strict guide: albeit useful

information.

Developing Credit Policy

In order to write a policy, there are at least six questions that a company must answer:

 What is the mission?

 What are the goals?

 Who has specific credit responsibilities?

 How is credit evaluated?

 How is collection handled?

 What are our terms of sale?

2) DISCOUNTS & ALLOWANCES

Discounts and allowances are reductions to a basic price. They could modify either the

manufacturer's list price (determined by the manufacturer and often printed on the package), the

49
retail price (set by the retailer and often attached to the product with a sticker), or the list price

(which is quoted to a potential buyer, usually in written form).

The most common types of discounts and allowances are:

1. Cash discounts for prompt payment

2. Cash discounts for preferred payment method

3. Quantity discounts

4. Seasonal discounts

5. Forward dating

6. Promotional allowances

Debtor Management at Unitech Corporate Parks PLC

1. Allowing credit period to the customers

It involves allowing credit period to the customers to pay their dues. The company
frequently liberalizes its credit period to increase the demand.

2. Discount policy

Discounts are usually allowed to speed up the collection process, and to induce the
customers to pay the dues early.

3. Financing the receivables

Company finances its receivables frequently with the help of following sources:

a) Bills discounting

b) Cash credit against hypothecation of book debts as the security.

50
WORKING CAPITAL ANALYSIS

Concept of working capital has its own importance in a going concern in the smooth running of a

business. It is useful both for the financial management and for the executives of an undertaking.

Usually, the working capital balance of a going concern has a positive value but often the uses of

working capital exceed the sources of working capital. In efficiently, managed companies, such

deficits are soon offset by gain in the following periods. A study of the causes of changes in the

uses and sources of working capital is necessary to observe whether working capital is serving

the purpose for which it has been created or not. This involves the basic approach to working

capital analysis.

51
 The analysis of working capital can be made either through

 Ratio Analysis

 Fund Flow Analysis

 Budgeting Analysis

  Ratio Analysis

The ratio analysis of working capital helps the management in checking upon the efficiency for

which the working capital is being used in the business.

The important ratios are:

A. Debt- Equity Ratio- It is the ratio between the debt and equity. It explains what is the

ratio of debt and equity in the company’s capital.

                                                   Debt

Debt Equity Ratio =      --------------------------

Equity

B.     Current Ratio

It is the ratio between the current asset and current liabilities. It measures the ability for the

company to pay its short-term debts.

52
                                             Current Assets

             Current Ratio = ---------------------------

                                           Current Liabilities

C.     Acid Test Ratio

It is the ratio between the quick asset and current liabilities. It promises strong financial position.

Acid test ratio = Liquid Assets

Current Liabilities

D. Cash Ratio

It is the ratio between current asset and cash. It promises availability of cash to meet day-

to-day requirements. Higher ratio shows idleness of fund.

E.      Ratio of Current Liabilities to Tangible Assets

The ratio is the relation between the current liabilities to the total net worth of the company. This

shows a comparison between funds contributed by the short-term creditors and those contributed

by owners.

53
WORKING CAPITAL ANALYSIS AT Unitech Corporate Parks PLC

CURRENT RATIO

YEAR 2005 2006 2007 2008 2009

C.Ratio 0.43 0.48 0.95 1.24 0.97

54
It measures the short term solvency of the firm, its ability to meet short term obligations which

indicate the rupees of current assets available for each rupee of the current liability. It is a margin

of safety for creditors. The current ratio of 2:1 has been considered satisfactory. The Industry

does not maintain the ideal 2:1 ratio because it is a high investment sector and majorly works

with loans and debts.

QUICK RATIO

QUICK ASSETS: includes all current assets other than stock and prepaid expenses.

YEAR 2005 2006 2007 2008 2009

Quick Ratio 0.4 0.46 0.94 1.24 0.97

55
It is widely available test of measure of liquidity position of the firm. It is superior to the current

ratio test .The Quick Ratio of 1:1 is considered to be satisfactory as a firm can easily meet all

current claims. While calculating it, prepaid expenses and inventory are excluded from current

assets.

The Industry does not maintain the ideal 1:1 ratio because it is a high investment sector and

majorly works with loans and debts.

However during the peak period it reached near to the desired.

CASH RATIO

YEAR 2005 2006 2007 2008 2009

Cash Ratio 0.04 0.032 0.03 0.03 0.01

The Industry does not maintain a high ratio because it is a high investment sector and majorly

works with loans and debts.

56
 PROFITABILITY RATIOS

Gross Profit Ratio

YEAR 2005 2006 2007 2008 2009

Gross profit 14.81 24.57 59.04 55.52 60.66

Ratio

It measures the percentage of each sales rupee remaining after the firm has paid for its goods.

The sales declined from 2008 to 2009 , however the Gross profit increased due to the decrease

in the raw materials and Manufacturing expenses.

Operating profit ratio

57
YEAR 2005 2006 2007 2008 2009

Operating 10.37 19.85 57.48 53.40 57.65

profit Ratio

70.00
57.48
60.00
50.00 57.65
53.40
40.00
30.00
20.00
19.85
10.00
10.37
0.00
Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

The operating Expenses does not change significantly hence it follows a same trend as Gross

profit.

Return on investment ratio

YEAR 2005 2006 2007 2008 2009

ROI Ratio 17.20 31.01 84.72 48.08 25.87

58
 90.00 84.72
80.00
70.00
60.00
48.08
50.00
40.00
30.00
20.00 31.01
25.87
10.00
17.20
0.00
Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

Initially, the company had a low ROI, but later on the ROI kept on increasing and later on it felt

to 25%, meaning that the return on investment is decreasing when compared to the previous

years. So the investors might look out for an opportunity to invest in other stocks.

During the Boom in the real estate market, Unitech gave a very high return on Investment, but

with the slowdown hitting the Indian Economy, the ROI fell down tremendously.

Return on capital employed

YEAR 2005 2006 2007 2008 2009

ROCE Ratio 10.42 11.72 24.70 13.88 13.87

59
 30.00
24.70
25.00
20.00
15.00
13.88 13.87
10.00 11.72
10.42
5.00
0.00
Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

The Return on Capital Employed is fluctuating in nature.

This is unfavorable for Company’s image as it may result in decrease in the confidence among

the investor’s about the company’s performance, as investors invest in those companies which

more often have a constant ROCE or whose ROCE keeps on increasing.

The company should take measures to improve it's Return on Capital Employed, so that the

investors and the shareholders regain the confidence in the company

Net profit to net worth

YEAR 2005 2006 2007 2008 2009

Net profit to 0.17 0.31 0.85 0.48 0.26

net worth
Ratio

60
 0.85
0.80
0.60
0.40 0.48
0.20 0.31
0.26
0.17
0.00
Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

This ratio is used to analyze the ability of the firm's management to realize an adequate return on

the capital invested by the owners of the firm.

Tendency is to look increasingly to this ratio as a final criterion of profitability.

With the slowdown in the real estate market, the net profits of the company have fallen.

The Net Worth of the company has risen tremendously but the profits of the company have not

increased in lines with the Net worth and hence the ratio has fallen.

Earning per share

YEAR 2005 2006 2007 2008 2009

Eps Ratio 24 56 12 6 5

61
 EPS shows the portion of company's profit allocated to each outstanding share of

common stock. It is the Indicator of company’s profitability and Stock split.

Dividend per share

YEAR 2005 2006 2007 2008 2009

ROCE Ratio 4 1 0.5 0.25 0.1

4.5
4 4
3.5
3
2.5
2
1.5 1
1 0.5
0.5 0.25 0.1
0
Mar 05 Mar 06 Mar 07 Mar 08 Mar 09

62
DPS shows how much the shareholders were actually paid by way of dividends.

Like EPS, there is a constant decrease in DPS over the years.

Dividend payout ratio

YEAR 2005 2006 2007 2008 2009

dps Ratio 16.71 23.31 4.13 3.94 2.76

25.00 23.31

20.00
16.71
15.00
10.00
4.13 3.94
5.00 2.76
0.00
Mar 05 Mar 06 Mar 07 Mar 08 Mar 09

It measures the relationship between the earning belonging to the ordinary shareholders and the

dividend paid to them.

D/P Ratio is significant in the years 2005 & 2006, however, it does on decreasing in the

subsequent years.

63
Retention ratio

YEAR 2005 2006 2007 2008 2009

retention 83.29 76.69 95.87 96.06 97.24

Ratio

120.00

100.00 95.87 96.06 97.24

83.29
80.00 76.69

60.00

40.00

20.00

0.00
Mar 05 Mar 06 Mar 07 Mar 08 Mar 09

Retention Ratio indicates what percentage share of the net profits is retained in the business.

The D/P Ratio is low in the years 2007, 2008 & 2009, the earnings retained by the company is

high

Dividend yield ratio

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YEAR 2005 2006 2007 2008 2009

Dividend 1.46 0.04 0.00 0.00 0.00

yield Ratio

1.60
1.40 1.46
1.20
1.00
0.80
0.60
0.40 A financial ratio that shows how
0.20 0.04 much a company pays out in
0.00 0.00
0.00 0.00
Mar 05 Mar 06 Mar 07 Mar 08 Mar 09 dividends each year relative to
its share price. Dividend Yield

Ratio has almost reached zero in the later years.

TURNOVER RATIOS

Inventory turnover ratio

YEAR 2006 2007 2008 2009

Inventory 16.01 30.76 47.65 57.60

turnover Ratio

65
 70.00
57.60
60.00
47.65
50.00
40.00 30.76
30.00
20.00 16.01
10.00
0.00
Mar 06 Mar 07 Mar 08 Mar 09

Stock turn over ratio / Inventory turn over ratio indicates the number of time the stock has been

turned over during the period and evaluates the efficiency with which a firm is able to manage its

inventory. The Inventory T/o Ratio has increased from 16 to 57 in the given period. This is

largely due to decrease in the inventory level of the company

Debtors turnover ratio

YEAR 2005 2006 2007 2008 2009

ROCE Ratio 8.91 8.53 25.03 3.36 2.23

30.00
25.00 25.03
20.00
15.00
8.91
10.00 8.53
5.00 3.36
2.23
0.00
Mar 05 Mar 06 Mar 07 Mar 08 Mar 09

66
Debtors turnover ratio or accounts receivable turnover ratio  indicates the velocity of debt

collection of a firm. The Debtors T/o Ratio has gone down considerably which is not good. A

high Debtors T/o Ratio reflects the liquidity position of a company to meet its short term

obligations.

Working capital turnover ratio

YEAR 2005 2006 2007 2008 2009

Working -0.64 -0.52 -10.57 1.48 -8.31

capital
turnover
Ratio

4.00
2.00
0.00 1.48
Mar
-2.00 '05
-0.64 Mar '06
-0.52 Mar '07 Mar '08 Mar '09
-4.00
-6.00
-8.00
-10.00 -8.31
-12.00 -10.57

Negative working capital means that a company currently is unable to meet its short-term

liabilities with its current assets In the real estate companies, products are delivered and sold to

the customer before the company ever pays for them and hence these companies do not feel the

67
need to maintain huge Current Assets. Only in the year, 2008 the company had a positive

working capital as the company had generated huge current assets from selling it's products.

Capital turnover ratio

YEAR 2005 2006 2007 2008 2009

Capital 40.78 52.29 27.93 10.21 5.44

turnover
Ratio

60.00 52.29
50.00
40.00
40.78 27.93
30.00
20.00
10.00
10.21
0.00 5.44
1 2 3 4 5

Capital turnover is used to calculate the rate of return on common equity, and is a measure of

how well a company uses its stockholders' equity to generate revenue. The higher the ratio is,

the more efficiently a company is using its capital. As the ratio is falling in the years, the

company is becoming less efficient. It might lead to the outflow of the investors funds from the

company.

SOLVENCY RATIO

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Debt to equity ratio

YEAR 2005 2006 2007 2008 2009

Debt to equity 3.65 6.92 5.77 7.34 4.61

Ratio

It Indicates the relative proportions of debt and equity in financing the assets of the firm,

Largely financed by the creditors of the firm, Capital intensive in nature and New

strategy adopted to tackle high debt.

Proprietary ratio (%)

YEAR 2005 2006 2007 2008 2009

Properity 35 25 24 21 27

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Ratio

It Indicates to what extent of the total assets is financed through the owner’s capital This

ratio does not give a good picture .Highly dependent on external funding.

Capital Gearing Ratio (%)

YEAR 2005 2006 2007 2008 2009

Capital 53.71 32.7 32.2 26.41 37.24

gearing
Ratio

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\It shows the relationship between equity share capital including reserves and surpluses to

preference share capital and other fixed interest bearing loans. Company is highly geared have

Burden of interest and loan repayment and Might have problems getting loans in the future.

Conclusion
In the years ahead, the Commercial Real industry in India has to overcome various challenges
with respect to housing, environment, transportation, power or natural hazards.

Commercial Real Estate industry is growing at a faster rate in the India. The gains of large
investments in the mega-projects eventually will feedback to the construction industry itself in
the form of better economy and improved work conditions.

The outstanding performance under demanding situations in the past will stand in good stead and
give confidence to the Indian real industry to bring about an overall development in the
infrastructure of the nation.

we can conclude that the investment in UNITECH LTD Is beneficial because the company is
profit making and growing at a faster rate. The Net Profit of the company is increasing and the
Price Earning ratio is also higher

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 RECOMMENDATIONS & SUGGESSTIONS

Keeping in view of detailed analysis and study of data of Unitech Corporate Parks Lthe

following suggestions shall be helpful in increasing the efficiency in Working Capital

Management.

 Estimation of working capital requirement should be done on the basis of length of

operating cycle of different products.

W.C requirement = Avg. daily requirement of WC * Length of operating cycle

 In case of inventory management ABC analysis, VED technique should be emoployed.

Further an inventory monitoring system should be introduced to avoid holding of excess

inventory.

 The maximum and minimum level of each item should be indicated to avoid over

stock or under stock situation.

 Internal performance report on inventory on atleast monthly basis should be prepared to

study the material price variance, material usage variance and inventory level variance

from the estimated figures.

 Management should develop a credit policy that is more practical so as to shorten the

debt collection period. The techniques referred to in the project regarding receivables

72
 management should be adopted so that efficient and effective management of accounts

receivables can be ensured. This will significantly improve the profitability and liquidity

of the company.

 Purchase policy regarding raw material, consumables, tools etc. should be introduced i.e

Just in Time technique, EOQ which helps in rectifying, in proper planning of inventory,

availing of maximum trade or cash discount and availing maximum credit period from

suppliers that will ultimately increase the efficiency of inventory management.

73
BIBLIOGRAPHY

Annual Report- unitech corporate parks plc.

Newspaper Articles

BOOKS

Financial Management (I.M Pandey)

Khan M.Y and Jain P.K, Financial Management

WEBSITES

www.unitechcorporateparks.com

www.google.com

www.wikipedia.com

www.investopedia.com

www.moneycontrol.com

www.bseindia.com

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www.nseindia.com

ANNEXURE-1

75
ANNEXURE-2

76
ANNEXURE-3

77
CASE STUDY

78
DEMERGER OF UNITECH GROUP

COMPANY BACKGROUND
Unitech Limited, India's leading Real Estate and Infrastructure Company was established in
February 1971 as United Technical Consultants Pvt. Ltd and was than converted into a public
limited company in October 1971. Established in 1972, Unitech today is India's leading real
estate company with projects across the country. Unitech is known for the quality of its products
and is the first real estate developer to have been certified ISO 9001:2000 certificate in North
India. The Unitech brand is well recognised in India and was once again conferred with the title
of “Superbrand” by Superbrand India in 2010.

Unitech has the most diversified product mix comprising Residential, Commercial/Information
Technology (IT) Parks, Retail, Hotel, Amusement Parks and Special Economic Zones (SEZ).
From its beginnings as a real estate developer focusing on the NCR, the Unitech Group has
expanded its operations to other major cities in India including Kolkata, Hyderabad, Bangalore,
Kochi, Chennai, Lucknow, Varanasi, Chandigarh and Agra. The Company is also the recipient of
the CW Architect and Builders Award, 2008 for being one of India's Top Ten Builders.

Unitech has long partnered with Internationally acclaimed architects and design consultants
including SOM(USA), BDP(UK), Maunsell AECOM(HK), MEA Systra(France), Callison Inc.
(USA), FORREC(Canada), SWA and HOK(USA) for various projects. Unitech's clientele for
commercial projects includes global leaders such as Fidelity, McKinsey, Bank of America, Ford
Motors, Nike, EDS, Hewitt, Amdocs, Ernst & Young, Reebok, Keane, Seagrams, Perfetti, Exxon
Mobile and AT Kearney.

Unitech Ltd. and Norway Based Telenor Group (6th Largest Mobile Communication Provider in
the world) came together to build UNINOR - a telecommunication service company and is
providing GSM services in 22 circles across India.

COMPANY BACKGROUND OF DEMERGER PROCESS

Unitech is demerging its infrastructure business and list it separately as Unitech Corporate Park
(UCP). UCP will include general construction, SEZs/ IT parks, industrial parks, township
management etc. Unitech will be the largest shareholder with 35% stake in UCP, 33.3% will be
offered to investors and balance 31.7% will be with the promoters. The existing Unitech
shareholders will receive one share of UCP for every share held by them. We believe the
restructuring exercise would be positive on account of – 1) It would allow shareholder’s to

79
choose between real estate and infrastructure businesses; 2) It would unlock value of the non-
core businesses; 3) Infrastructure business could avail of financing on favorable terms (as
compared to real estate projects).

The review process started long before current market conditions were evident and we believe
demerger will be delivering value for shareholders when the current market conditions are
regarded as history. The Board has a strong track record on bold decisions.

DEMERGER AS A BUSINESS STRATEGY

Demergers are situations in which divisions or subsidiaries of parent companies are split off into
their own independent corporations. The process for a demerger can vary slightly, depending on
the reasons behind the implementation of the split. Generally, the parent company maintains some
degree of financial interest in the newly formed corporation, although that interest may not be
enough to maintain control of the functionality of the new corporate entity.

A demerger can be seen as the opposite of a merger. With a merger, the object is to take two
separate business entities and combine them to form a new corporation that is able to accomplish
more than the two former entities could ever accomplish on their own. The demerger still has the
same ultimate goal. However, the thought is that by splitting off a portion of the existing
company into a new and separate corporate entity, the chances for success and profitability are
greater than if the company remained one unit.

It is not unusual for shareholders and key executives to maintain some involvement with both the
parent and the newly formed company. For example, the two entities may have individuals who
serve on the board of directors for both entities. It is also not unusual for the parent to retain
some type of interest or investment in the new entity. If the stake held in the new company is
considered to be a majority, then the new entity is more properly termed to be a subsidiary.
However, if the investment in the new company is not a majority share, then the new business is
properly referred to as a demerging entity or company.

There are many reasons why a company may undergo a demerger process. In some cases, the
action may be necessary in order to comply with laws and regulations in place in a location
where the company wishes to establish a presence. At other times, a division may have reached a
point where it would become more profitable if it were to become an entity that is separate from
the parent. The demerger may come about because the parent is changing direction and the
division may be spun off as a way to continue meeting the needs of current clients while
allowing the parent to focus on new markets. In all cases, the general idea behind the demerger is
that the action will prove to be profitable for all parties concerned.

Unitech

80
Maintain Buy

Unitech’s board has approved a plan to hive off some businesses into a new entity called
Unitech Infra to un-lock value. We see little value addition to our NAV until more progress is
made. We maintain our Buy rating and target price of Rs105.

Unitech Infra – the new entity

The new entity would own Unitech’s divisions such as GCC, Towers, IT SEZs, amusement park
and telecoms. The advisors have put the new entity’s fair value at Rs49.8bn (approximately 4x
actual book value), which after the split would be stated as book value and have debt of Rs3.5bn.
We await clarity from the “de-merger” documents and financial re-statements.

Seeking to unlock value

The de-merger is to focus on infra and related verticals and unlock value in them. At present, the
largest value (Rs34.8bn) arises from its telecoms stake and share in UCP. We await project
progress/details in the construction and BOT businesses before adding value.

For Unitech

Although Unitech would control 35% of the new entity, we would assign a holding company
discount (30%), which would add little (Rs3 a share) to current valuations.

Valuation

Our target is on par with the Mar ’11 NAV of Rs105. At the current market price, the stock
trades at 1.8x FY11e P/BV.

Unitech Infra – the new entity

Why the split

Unitech split off five business verticals into a new company Unitech Infra. The proposed “de-
merger” would be to focus on the infrastructure businesses, which had been lagging behind the
property-dominant company, given financial and execution constraints. Management indicates
that the new company would have a dedicated and experienced team. Most of the business
vertical heads are already in place, with a new CEO
and CFO to be appointed soon. The financial health of the new company will be much better,
with only Rs3.5bn in debt and, with the infrastructure verticals would make credit availability
easier.

Unitech Infra – proposed structure

81
“De-merger” scheme

After the split, Unitech would hold 35% in Unitech infra and act as a sponsor for further
activities. The board approved a swap ratio of 1:1; the remaining 65% of Unitech Infra would be
divided equally among Unitech’s shareholders. After the “de-merger” process (of approvals from
the board, exchanges, shareholders, creditors and the judiciary), the shares of the new entity
would be listed. This would take four to six months. Management has indicated listing in CY10.

Arriving at a fair value

According to provisional 9MFY10 figures provided, Unitech Infra had a net profit of Rs0.5bn on
revenue of Rs3.2bn. Unitech Infra has debt of Rs3.5bn and a net worth of Rs49.8bn. The net
worth has been arrived at using the fair-value method, book value being significantly less than
the fair value. For most of the assets in Unitech Infra, value unlocking is only on the horizon.
Most of the value, though, would be derived from investments in the telecomms venture and in
Unitech Corporate Parks (UCP).

Seeking to unlock value

Infrastructure – the oldest arm

Starting in infrastructure, Unitech graduated to a property company in the 1990s. The

infrastructure vertical would, to start with, pull together general construction, BOT and the
transmission tower businesses. At present, the company continues to contract for construction s
abroad though it plans once again to expand its footprint locally. It has Letters of Intent (LOIs)
for expected orders of Rs22bn from Unitech. For the BOT business, the company is looking for a
technical partner to start focusing on projects of between Rs20bn and Rs40bn. Given its past
execution, it technically qualifies for various categories of projects. Unitech initially planned to
sell its transmission tower business (with a factory in Nagpur). It has an order book of Rs5.1bn
(with Rs1.3bn being developed). The business secures margins of 7-8%.

Telecomms investments and UCP stake

Unitech’s investment in Uninor is ~Rs6bn. The three year lock-in from the license date ends Jan
’11. The acquisition also had convenants that Unitech could not sell its stake for three years from
Telenor Investment
(1.5 years left) unless there is an M&A. Unitech holds 40% in UCP (36% in one of six) and also
obtains management and sponsorship fees from it.

82
Amusement Park and the hospitality business
Unitech has two partially operational amusement parks, one each in Noida (148 acres) and
Rohini (62 acres). The retail malls and 22 rides each are operational, while water parks at both
locations are being constructed. In FY07 the company had divested part of the equity in Rohini
and the Noida amusement parks to private equity firms at Rs13.5bn. A third amusement park is
planned in Chandigarh over 73 acres. The company has indicated developing 11 hotels (2,100
rooms) in the the next seven to eight years. Of these, one on NH8, in Gurgaon and another in
Kolkatta (Mariott) are being constructed. Given the business downturn and financial constraints,
in FY09-10 management had slowed down its hospitality plans. Unitech eventually plans to
monetize the hotel properties.

Logistics and industrial park; property management

The company has one logistics park near Kona, in Kolkata, already launched for lease/sale, to be
handed over in phases. Two industrial parks are planned in the NCR, one of 315 acres (could be
extended to 500 acres) where Unitech held a 50% stake and the other, over 86 acres, recently
acquired. Initially, we had initially assumed only land values for our valuation. In property
management, the company has 10.3m sq. ft. and manages various townships and golf courses
constructed by Unitech.

Value addition

Given clarity in assets to be “de-merged” and some development plans, this would add Rs5bn to
the value (from our initial case of Rs45bn). We await further clarity in financials and
development/order book of the infrastructure vertical.

Unitech – After the split

Financials

Given that the current net worth of Unitech Infra is stated at fair value, for the “de-merger”
process, Unitech’s books would first have to be restated. Indications from the management put
the book value at between 20% and 25% of Unitech Infra’s fair value (Rs49.8bn). We await
further clarity from the management.

Land bank
Unitech’s land-bank share before the split, according to the last QIP document, was 7,467 acres
(of 9,060 acres). The split removes 550 acres from the current share of Unitech land bank. The
company has been acquiring small land parcels in Gurgaon for its new township (Nirvana
County 2 – 700 acres) to make the land contiguous. Approx. 100 acres is “guided” to be acquired
by end-FY11.

83
Value addition

Given Unitech Infra’s book value at ~Rs50bn, with Unitech holding a 35% stake, the value
addition after the split would be Rs3 a share, at a 30% holding-company discount.

Businesses benefit from specialization

Historic data shows that in the UK and US specialist companies have produced higher
shareholder returns over the last 10 years. We believe a balance sheet tailored to the respective
sector cycles has the potential to improve return on shareholders’ equity by a material amount.
We believe they will also be better positioned to access new fl ows of capital into the global
listed property sector.

BIGGEST CHELLENGE
In summary, the challenge to valuing demerger is to obtain a thorough understanding of the
business dynamics, the rationale for demerger, the industry dynamics, the resulting synergies as
well as the likely risk of the transaction are required . it is also important to understand that there
are no hard and fast rules since one is projecting the future which is unknown based on current
understanding. Therefore experience good judgement and diligence are important in working
out.

Synopsis of the project

84
 ” BASICS OF FINANCE AND FINANCIAL
UNITECH CORPORATE ANALYSIS FOR A REAL
PARKS
ESTATE COMPANY”

Student’s Name: Shallu

Industry Guide: Mr. Sunil Keshwani

Faculty Guide: Mrs. Meenakshi Malhotra

Understanding how company manages to integrate the functions of various

departments. It explains specifically how finance department works in the company
and what major role it plays in the functioning of the company. Further it describes
how company manages to reduce its cost of borrowings by availing different
products available with banks. It also describes in detail how company implements
and introduces various checks and controls for controlling its major operating costs.

This project further helps me in understanding the inventory management, cash

management, and debtors/ receivable management of the company and how
effectively they work on it.To understand the basics of finance & internal controls for a
real estate concern. To understand the basics as to how a company can reduce its cost
of borrowings by availing different products available for banks. To understand the
accounting procedures & implementing various checks & controls for operating
costs.To study the fundamental analysis. To study real estate industry and its impact on
Indian economy.

In total, the project was a great learning experience about how a real estate concern
deals with all its finances and systems.

I had 2 peoples Mr. Sunil Keshwani/Mr. Vijay Goyal as my

industry guide each one of them was so helpful and I never

85
had any problems working with them, they were experienced
advisor and supporter. Overall it was a very good experience
working with them.

The right mentor will lead by example, so that you can learn
simply by observing and knowing the person and that is what I
felt has happened with me during my 2 months internship.

86