01/02/2014
Bad debt: Hiranandani project auction on March 3
TNN Jan 30, 2014, 03.27AM IST
MUMBAI: Housing Development Finance Corporation Ltd (HDFC) on Wednesday invited bids to auction 158 acres of Hiranandani Gardens near Chennai after the developer failed to repay a Rs 539 crore loan.
The Chennai township project and one in Panvel, controlled by the Niranjan Hiranandani family, are embroiled in controversy, as lenders - Indian banks as well as global investors - are desperate to recover their money running into a few thousand crore rupees.
Both projects are stalled, leaving hundreds of families who had booked flats in the lurch. A dispute between Niranjan Hiranandani and his daughter Priya Hiranandani Vandrevala has further stirred the pot.
HDFC has set a reserve price of Rs 551 crore for the auction scheduled to be held on March 3.
"This is a rebid by HDFC," a Hiranandani Palace Gardens Chennai spokesperson said. "As stated earlier, Mr Niranjan Hiranandani has been disassociated with Hirco for the last three years and it is sad to see world-class locations with world-class construction go this way. Since the overseas investors have refused to recapitalize the project companies with capital needed, the bank needed to take this action to protect the Indian consumers and the Indian banks. We are now working to assist the flat purchasers of the project."
In 2006, father and daughter were part of an investment company, Hiranandani Infrastructure & Real Estate Company (Hirco), which was listed on the Alternate Investment Market of the London Stock Exchange; the company raised around Rs 3,000 crore from global investors for the two townships.
Both stepped down as chairman and CEO, respectively, of Hirco in 2010. In February last year, Hirco sued them, alleging they had committed fraud and other misconduct prior to their resignation in 2010.
The claim seeks damages of almost £220 million. Both have contested the proceedings.
The Hiranandanis had set up two special purpose vehicles (SPV), Hiranandani Palace Gardens and Sunny Vista Realtors, to develop the two townships and raised close to Rs 1,400 crore from financial institutions HDFC, Tata Capital, PNB, and LIC Housing Finance, among others. The total default by these two SPVs is believed to be over Rs 1,000 crore.
Early this month, Hirco said it found that cash collections for Panvel and Chennai were about £192 million (under Rs 2,000 crore) till November. The Chennai and Panvel assets had a value of £556 million (around Rs 5,500 crore). The secured assets debts of some or all of these assets is £101 million (Rs 1,000 crore).
"Hirco Plc has therefore written to the directors of the Indian project companies, demanding an explanation as to how and to whom the cash collections were disbursed and why the companies were unable to repay the debts," Hirco said.
Panvel project stalled:
Work on the firm's project in Panvel, Raigad district, has been stalled since last year. The project has a mix of commercial and residential properties and is spread over 588 acres. More than 1,000 flats are believed to have been sold in Panvel.
