Unitech Singapore IPO Under Taxman Lens

NEW DELHI: Unitech group’s proposal to raise money through an initial public offering (IPO) in Singapore is under taxman’s scrutiny. The company has proposed to sponsor and list a business trust in the Singapore capital market which would ultimately hold Unitech Hi-Tech Structures (UHTSL), a company involved in development of IT-related SEZ in Kolkata.

Unitech’s proposal, tabled before the Foreign Investment Promotion Board (FIPB) last week, has been deferred and it is being examined by the revenue department, a Dipp source said. It is understood from official sources that the board wanted to ascertain revenue implications of the “complicated share transactions” envisaged in the proposal.

When contacted, Unitech spokesperson said that the company was not aware of any such scrutiny by the revenue department. “The shareholding is being restructured to raise money in Singapore which will benefit Unitech shareholders as Singapore market offers better valuation,” he said.

According to the application pending with FIPB, the recently incorporated Unitech group entity — Jalore Properties — has proposed to acquire Unitech’s 36% equity stake in UHTSL. Other shareholders of UHTSL are Myna Holdings of Mauritius (a 100% subsidiary of LSE-listed Unitech Corporate Parks Plc) and Maxlon of Cyprus.

While Myna holds 60% equity capital of UHTSL, balance 4% is held by Maxlon. It is understood that all these companies are directly or indirectly held by the Unitech group. UHTSL is developing 19.58 hectare IT-ITeS SEZ in Rajarhat (Kolkata).

According to official sources, the Singapore IPO vehicle (business trust) which proposed to acquire shares of UHTSL from Unitech, would set up a two-tier holding company structure in Cyprus which would in turn hold 100% of shares capital of the Jalore Properties.

Jalore has applied to FIPB for its approval to acquire the 36% shareholding of UHTSL from Unitech. After the acquisition, the equity shareholding in UHTSL will be owned by the business trust (the Singapore IPO vehicle), through its wholly-owned subsidiaries in Cyprus and India.

It is understood from sources that the process would help the company in enjoying certain tax benefits. Capital gains tax exemption is available under the India-Singapore tax treaty as well as the India-Cyprus tax treaty.