First, it was the downturn last year as a result of which his companies collectively piled up debt of over Rs 7,000 crore (Rs 70 billion).
Then his group's telecom venture with Telenor came under scrutiny from the Comptroller and Auditor General as part of an investigation into the distribution of new licences for 2G mobile services.
Chandra, who spoke to Business Standard some days before A Raja resigned as communications minister and the telecom controversy hit the headlines, discusses the issues and his plans to get back into the game.
The telecom business has come under a cloud; the CAG report has said you misrepresented facts, that you did not have the requisite registration changing the articles of association to include telecom as a new area of activity, and that you applied for a licence just after the board resolution for the change was made without Registrar of Companies clearance.
That, the report said, is a violation of the Companies Act and the licence you received should be cancelled.
We have legal opinion and we do not think we have done anything for which we did not follow the rules. We have obtained the licence after complying with all the guidelines. We have also replied to their queries.
But there are allegations that you leveraged the spectrum scarcity to make a huge windfall by roping in Telenor as an investor soon after you got the licence. . .
Unitech Ltd has not sold any shares it held in Unitech Wireless to Telenor. The Telenor group invested Rs 6,135 crore (Rs 61.35 billion) in fresh shares over four rounds to hold a 67.25 per cent stake in the venture.
The licences were issued in February 2008, and the first round of investment from Telenor in Unitech Wireless was received after 13 months in March 2009 and the fourth round in February 2010 after receiving approval from the Foreign Investment Promotion Board.
It was difficult to understand why a real estate developer like you should get into the telecom business. There appears to be no synergy at all. Did you think it would be a profitable business?
Well, in 2007 we were about to raise over $1.5 billion through a qualified institutional placement issue (which was scrapped when the markets crashed) and it was pretty clear that we could not have put this money only in real estate.
We were looking for a diversification from real estate and opportunities arose in telecom. We talked to Telenor. We were clear in our minds that one of the parties would take the lead in the joint venture.
So, is your intention here just to monetise after some time?
Until we achieve our five-year business objective, I am not even thinking of it. We expect to get to 50 million customers by then.
We are fully funded till 2013 and we are clear that should the joint venture need more money, we will invest. My answer to your question is no.
But you were unable to keep a majority or equal stake, and gave the majority stake to Telenor. . .
We would have liked to keep a majority stake, but with the meltdown we went through a tough time.
Most experts say real estate is in a bubble with prices going through the roof. Do you agree?
I don't think it is a bubble at all. You get that feeling only when you look at the crazy prices in, say, Delhi, where there is hardly any land or construction.
So if you want to stay in upscale localities in Delhi you have to pay amazing prices. But look at central Gurgaon.
At their peak in 2007, prices here were Rs 5,000 a square foot (sq ft); in 2009, prices dropped to Rs 4,000 a sq ft.
Currently, they are Rs 7,000 a sq ft, a 40
per cent rise over last year. If you go to Sohna Road in Gurgaon, prices have risen from their 2007 peak of Rs 3,000 a sq ft to Rs 3,600 a sq ft -- just 20 per cent.
These increases are pretty much in line if you recall that salaries in the past five years have doubled, so buying houses has not become less affordable.
The downturn had added huge debt to your books, though you have managed to reduce some of that in the past few months. Has the slowdown taught you lessons and how do you plan to reduce your debt burden further?
We have been able to bring our debt down. Till June this year group debt stood at Rs 5,200 crore (Rs 52 billion).
Being developers, we have a lot of opportunity to monetise our projects. That is what we will be doing down the line rather than being asset owners.
For instance, we have four or five hotel projects of which three are under construction -- these include the Marriott Noida Courtyard and Country Inn in Gurgaon.
The valuation of these assets is Rs 700 crore (Rs 7 billion) to Rs 800 crore (Rs 8 billion).
Similarly, we have six IT park projects under the special economic zones scheme and some of them are operational.
We get a rental income of over Rs 160 crore (Rs 1.6 billion) from them.
We could monetise these too when the real estate investment trust market opens up, for instance.
How big is your land bank, and considering the financial problems do you have cash to expand it?
We have enough land to build 500 million square feet of space -- that will keep us busy for a long while so we do not need to expand it.
However, if opportunities arise that are attractive we will consider them.
As a group your next big thing is infrastructure. You are spinning off Unitech's infrastructure business into a new company. Why are you getting into this business in which there are already so many players?
We will get into build, operate and transfer projects in areas like highways, transmission lines -- you name it.
Currently, there are very few big players in this business.
We expect the BOT business to be worth at least $15 billion to $20 billion in the next three years, so there is no reason we cannot garner a turnover of Rs 5,000 crore (Rs 50 billion) in the same space.
Also, there is scope in the EPC business where, again, there are only a few big players. Most of the others are small contractors and they do not have the financial strength for big projects.
Indian real estate developers work with small volumes compared with their global peers. How will having your own construction company help?
Today the world's largest real estate developer in China does 70 million sq ft of space annually. In markets like China, Mexico and Brazil real estate developers are using new technology from pre-fabrication to parallel processing methods to build a large amount of space.
Compared to that, Unitech developed about 16 million sq ft of space in 2009.
Over the next three years, we plan to develop the ability to build 30 to 40 million sq ft of space every year. We have to build homes like you produce goods in a factory.
For example, we started using ready-mix concrete, which reduces time, and we have to go for parallel processing with multiple vendors.
The key in this is to get skilled manpower and train them to the new complexities. In the next two years, I will require 2,000 such specialised people.