Lavasa Corp considering approaching the National Company Law Tribunal by March-end
India's first private hill city project Lavasa, envisioned by infrastructure major Hindustan Construction Company (HCC) chairman Ajit Gulabchand, could be heading for bankruptcy.
Lavasa Corporation Ltd (LCL), a unit of HCC that's developing it, is considering approaching the National Company Law Tribunal (NCLT) owing to challenges faced in raising money for project completion.
"The Lavasa management is planning to declare bankruptcy and is likely to approach the NCLT by the end of this month i.e, March 2018. The funds-starved company is finding it difficult to manage day-to-day operations and has started resorting to selling non-core equipment to raise money and meet immediate expenses. Besides, the pressure is also building from people who had bought apartments/villas many years ago to refund the money as they have not been given a possession of their respective assets," a source said, requesting not to be quoted.
When contacted, a spokesperson from Lavasa Corporation Ltd said, "As a policy, we avoid commenting on market speculations."
However, the spokesperson added, "We have been working jointly with the consortium of lenders for a financial solution for Lavasa. Due to Reserve Bank of India's recent notification on Insolvency and Bankruptcy Code, the process has been slowed down till further clarity on the finer nuances of the revised framework emerge. We are hopeful of a comprehensive solution for Lavasa's debt recast once the revised framework is deliberated to the satisfaction of all involved."
Once touted to be India's first smart city spread across 25,000 acre in Mugaon and Dasve near Pune, Maharashtra, the project has been facing various hurdles including policy flip-flops and alleged wrong-doing by activist groups. The delays and setbacks significantly marred the development, bringing construction work to a standstill, thus prompting investors to seek a refund and or adequate compensation.
"Lavasa needs to deliver residential units the overall value of which is estimated to be over Rs 700 crore. To clear the delayed delivery, it will need at least Rs 300-350 crore. However, that's not possible as no additional funding is coming into the project and there is no certainty on the completion of these housing units," said sources.
In fact, investors in Lavasa's residential units had approached the Maharashtra Real Estate Regulatory Authority (MahaRera) seeking a resolution. MahaRera had initially dismissed their complaints in its January 15, 2018, order, terming the buyers as lessees and not flat owners. However, just last week, the tribunal set aside its earlier order and the case will now be heard in Mumbai on March 27, 2018.
The Lavasa spokesperson in his response said, "We cannot comment on MahaRera's decisions. However, there was an unreasonable stoppage of the project and the consequences thereof, including delays in joint decision-making within the lenders' forum, further impeded Lavasa's ability to function. Lavasa's top priority is to safeguard the interests of all stakeholders, including the home buyers, who have believed in and supported the project."
The company's plans to raise funds plans by going public, which have been on cards since 2010, have not materialised either.
Owing to burgeoning debt, reportedly around Rs 5,000 crore as of May 2017, lenders to Lavasa township project invoked the strategic debt restructuring (SDR) scheme in September last year, after an earlier financial restructuring plan failed.
According to a red herring prospectus (RHP) filed by Lavasa, the consortium of lenders was led by Union Bank of India and included Punjab National Bank, Corporation Bank, UCO Bank, Canara Bank, Oriental Bank of Commerce, The Karnataka Bank Ltd, Bank of India and Bank of Baroda.
Lavasa had also issued non-convertible debentures (NCDs) to ICICI Bank, J&K Bank, India Opportunities Fund and SSG Investment Holdings etc. While ICICI is understood to have sold NCDs worth Rs 250 crore to Asset Reconstruction Company (India) Ltd sometime in May 2015, the status of others is unknown.
Exits of senior executives is another challenge that Lavasa Corp has been facing since last many years. In fact, the most recent exit happened last week with the sacking of Pritpal Singh who was chief operating officer, Lavasa Corp Ltd. The spokesperson did not comment on queries seeking a confirmation and reasons for his exit. DNA Money has also learned that Ravindra Singh, chief operating officer, HCC Concessions Ltd, has been given the additional responsibility to oversee Lavasa operations.
NOT SERENE
- The funds-starved company is finding it difficult to manage day-to-day and has started resorting to selling non-core equipment to raise money and meet immediate expenses, sources said
- Besides, the pressure is also building from people who had bought apartments/villas many years ago to refund the money as they have not been given a possession of their respective assets
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