Unitech Corporate Parks has agreed a new set of payment principles with its affiliate investment manager Nectrus Limited which will put greater weight on performance and commit Nectrus to invest in the company’s shares.
It is the latest sign that Indian companies are seeking ways to improve their share prices by making the payment of their investment managers more performance dependent. Previously Unitech paid Nectrus a flat fee regardless of performance. Shares in the company rose by 11 percent to 10.75p this week but the rise follows a drop from a year high of 100p last March.
While the current annual management fee received by the Nectrus will stand at 2 percent of the equity it invests, 25 percent of the management fee will be deferred until the eventual sale of each asset is completed and will be contingent on an internal rate of returm of at least 10 percent being achieved on that project. If a 10 percent IRR is not achieved, this proportion of the management fee will be retained by the company.
The remaining 75 percent of the management fee will be paid under the terms of their original agreeemt, but the Investment Manager will invest all these fees in UCP shares, which will be acquired in the open market.
Nectrus was appointed as investment manager to UCP at the time of the company’s admission to AIM in March 2006.