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'DNA' exclusive: Abhijeet Group got five coal blocks and Rs22,000 cr loans

Monday, 10 September 2012 - 10:00am IST | Place: NAGPUR | Agency: DNA
Did group head’s friends help him get huge loans despite low revenue streams?

Rajiv Ranjan Singh l Nagpur
A 10-seater Bombardier jet, a flat in Mumbai that costs Rs75 crore, daughter’s wedding bash in Phuket, real estate in Nagpur running into crores… Manoj Jayaswal, chairman of the controversial Abhijeet Group, sure lives life king-size.
Jayaswal’s leapfrog began after he got five coal blocks, but that would only be half the story.

His group leveraged the free booty by proposing power projects and got Rs22,000 crore of loans sanctioned from various banks. Of this, Rs11,000 crore has been disbursed with no project near commissioning, and that could be the beginning of bigger problems for lenders, said experts.

Monthly interest payments along with salary and administrative expenses run into huge sums, between Rs100 crore and Rs110 crore, for the Abhijeet group.

The Abhijeet Group’s website talks of setting up pithead-based thermal power stations of 5,000MW in Jharkhand, Maharashtra, Bengal and Bihar, and 10 million tonne/annum in integrated steel plants. It’s set to become India’s largest manganese alloy producer by setting up an export-based 180 MVA facility at Visakhapatnam. It is also setting up a 50MW solar plant.
But barring the 271mw Mihan plant, none of its projects is anywhere near on stream so far. While Rs11,000 crore has already been disbursed…

This can’t happen without powerful connections, and sure enough, Manoj Jayaswal had had a few.
These include media baron and Nagpur MP Vijay Darda, and Aastha channel founder Santosh Jain. The channel was sold to Vedic Broadcasting Ltd, where Baba Ramdev’s aide Bal-krishna, is one of the directors with 99.9% stake and which reported an annual turnover of Rs19.26 crore in 2009-10.

Darda was the key person at the wedding reception of Jayaswal’s son, Abhijeet, which took place last year at Udaipur’s Lake Palace and at Hotel Lalit. Praful Patel, who was then the Union aviation minister, spent two days at the wedding function, overseeing the arrangements. Darda is said to have played the biggest role in the coal blocks being allotted to Jayaswal.

For the record, Darda and kin hold at least 4.18% stake in Jas Toll Road Company, as mentioned in the offer document of Abhijeet Power, filed in 2011.

The Abhijeet Group is said to have separated from parent company Jayaswal Neco, the listed entity promoted by Jayaswal’s father Basantlal Shaw, in July 2008 because of Darda’s increasing interest and intervention in Shaw’s business.
According to a former employee, in 2008, Abhijeet Group had only three active projects -- Corporate Ispat Alloys (CIAL), which ran a 36 MVA ferro alloy plant in Durgapur and had a topline of Rs298 crore and bottomline of Rs13 crore in 2008-09; Jas Toll Road Company, which operated a 32km section of NH-4 between Neelamangla and Tumkur near Bangalore in which Abhijeet Group divested 33% to IDFC for Rs65 crore; and a bridge toll project operated in Bhandara, called Ashoka Infrastructure, which had a daily collection of Rs2.5-3 lakh and where Abhijeet Group owned just 50% stake.

The group, under Abhijeet MADC Nagpur Energy Pvt Ltd, had also started a 271mw power plant in Nagpur’s Mihan area, which was barely at break-even level, if not incurring losses.
“In all probability, the group’s topline was not over Rs500 crore in 2008-09,” said the former employee.

Fast forward three years and what have you?
The group today includes 58 companies, mainly engaged in natural resources, power, steel and road construction, while Jayaswal Neco is a much smaller player with debt alone of Rs1,213 crore.

With such low revenue streams, how did the Abhijeet Group receive Rs22,000 crore of loans? What were the banks thinking?
The thumb-rule for projects funded by banks is that that the borrower must invest at least 30% of the project cost. By that metric, Manoj Jayaswal or the Abhijeet Group should have invested at least Rs3,300 crore towards projects.

A former chief financial officer of a mining and coal company alleged that Abhijeet Group got “sweet deals” from banks. He alleged that most of the loans provided by Axis Bank to Abhijeet Group were in the ratio of 80:20, meaning the bank gave 80% loan, while the company put in 20% capital as equity in the total project cost.

So, did the banks dropped their guard to help Jayaswal? Even here, the name that crops up is Darda’s.

“Darda has been a member of the parliamentary standing committee for banking and finance for the past 14 years,” said a top businessmen from Nagpur, who wished to remain anonymous.

A mining consultant based in Nagpur said none of the five coal blocks belonging to Abhijeet Group has started production.  “It is not just a coal scam, but a loan scam too, where mining lease has been used to avail of loans from banks,” he said.
Despite using up Rs11,000 crore, not even the first phase production of the 1,080mw Chandwa thermal project or the 1,320mw Banka Power project has started.

As per the draft prospectus submitted by Abhijeet Power, Axis Bank, Punjab National Bank and UCO Bank had agreed to finance the company’s Banka project to the tune of Rs7,400 crore. The three power projects, Chandwa, Banka and Mihan entailed an investment of Rs13,482 crore.

“Banks are at great risk here,” said the mining consultant.
The CEO of an infrastructure company told DNA that Abhijeet Power gave all its engineering, procurement and construction (EPC) contracts to its own infrastructure companies, including Abhijeet Projects. As per the Electricity Act, 2003, a global tender is mandatory for appointing EPC contractors by the power generation company.

“This company had no prior experience of developing any mega power project. How come no banker or authorities raise an eyebrow when Abhijeet Power allotted the EPC contract to its sister concern?” he said. He alleged that the motive for giving such dubious contracts was to swindle money from the project in the form of inflated bills and routed these back as promoters’ equity.

When DNA contacted AK Shrivastava, director and official spokesman of the Abhijeet group, he declined to reply to any queries.

Abhijeet Power’s draft offer document to raise Rs1,375 crore from the public in 2011 had claimed that it had invested Rs3,164 crore in the Chandwa and Banka power projects as of April 30 that year and planned to invest an additional Rs3,100 crore by March 31.
Where did the money to invest come from? Were costs inflated and the excess money refunnelled as promoter equity?
A former top official of a city-based power company, on the condition of anonymity, has alleged that banks gave loans of over Rs1,100 crore to the Mihan project despite knowing that the project does not have fuel linkage from any Coal India subsidiary.
The consortium of banks that have an exposure to Nagpur Mihan project are Bank of India (Rs67 crore), SBI (Rs300 crore), Indian Overseas Bank (Rs300 crore), Axis Bank (Rs300 crore) and Union Bank of India (amount not disclosed).

The managing director of a global coal company told DNA that the modus operandi was to acquire more and more projects and real estate assets and raise loans by keeping them as collateral.
“That is why the company purchased the loss-making Ellora Paper Mill from Sudhir Goenka for an undisclosed amount and the Milestone-2 building in Ramdaspeth, Nagpur, from Shankarlal Jalan for Rs35 crore, which was originally planned as a hospital,” he said, adding that the group is now raising Rs110 crore from Bank of India by keeping Milestone-2 as collateral.

“Abhijeet Group has four finance teams working in Nagpur with team leaders Daiditya Kanhare, Rajesh Jain, PN Krishnan and Rajesh Tulsiyani. It also has one finance team each in Delhi, Kolkata and Mumbai reporting to chief finance officer Tulsiyani. Over 50 people in these finance teams chase only bank loans and try to raise as much capital as possible,” the official added.
A chartered accountant told DNA that large-scale entries were found in Abhijeet Group companies’ transactions during an I-T raid in 2010-11. It came to light that five mysterious companies based in Kolkata had put Rs1,200 crore as equity capital in various Abhijeet Group companies.

“Abhijeet Group has shifted its corporate headquarters to Kolkata. Jayaswal, with the help of his relative Santosh Jain, settled the issue with the I-T department by paying a penalty of Rs130 crore,” he said.

Jain’s daughter is married to Abhishek, elder son of Jayaswal who is also charge-sheeted by the CBI in the coal scam.
The CBI-named blocks are in Mahuagarhi, Jharkhand (allotted in 2008 and shared with CESC), Fatehpur East, Chhattisgarh, and Bander, Maharashtra.

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