Syndicate to sell GVK asset to recover dues

The lender has decided to invoke the Sarfaesi Act to recover the Rs 175-cr loan

Syndicate Bank has, in a major embarrassment to the debt-laden GVK Group, put the 2,500-acre GVK Perambalur SEZ Pvt Ltd in Tamil Nadu for sale through e-auction.

It has done so by invoking the stringent Sarfaesi Act which enables lenders to put the collateral of defaulting companies for auction. The government-owned lender is owed Rs 175 crore by the company.

This is the second time the bank's corporate finance branch in this city has issued a notice for e-auction of the 2,500 acres of SEZ land. No bidders had responded to the first auction notice, dated January 6. The fresh e-auction is scheduled on March 27.

"As we could not get a response from the potential bidders to the earlier e-auction, we have issued newspaper advertisements with a fresh auction schedule this time in Mumbai city, in addition to Hyderabad and Chennai," P Veera Reddy, chief manager of the corporate branch of the bank, told Business Standard on Thursday. Asked for a reaction, a GVK spokesperson said the company had been negotiating with the bank and the entire Rs 175 crore would be settled in the next few weeks. "As we will be repaying the loan in the next few weeks, we hope the bank will not go ahead with the auction," the spokesperson told Business Standard.

The bank's officials seem sceptical. "I have no information either about the company talking to the bank or its offer to repay. They had said the same thing when we issued the first auction notice but never turned up to repay," said Veera Reddy.

The lender holds the first charge (mortgage) on the said property. According to the advertisement, the company had paid about Rs 8.9 crore to the bank between September 2016 and February 2017, after it received a demand notice for Rs 156.76 crore from the corporate finance branch, in December 2015. The dues, including interest, are now Rs 175.08 crore, the bank said.

According to Reddy, the entire property will be sold as a single unit. After loan recovery, the remaining auction proceeds will be given to the company for repayment to the other lenders. A bidder has to deposit Rs 25 crore as earnest money deposit with the bank to participate in the auction.

The bank also revealed that it had issued a no-objection certificate in favour of HDFC Bank for a second charge on the SEZ land, against which the latter bank HDFC had extended credit facilities to the extent of Rs 1,078 crore to GVK Airport Developers Ltd.  Another lender, Axis Bank, is claimed to have a subservient charge against the same property for a Rs 205 crore loan it extended to GVK Power and Infrastructure. 

The Hyderabad-based energy-to-airports infrastructure major has been sitting on a consolidated debt pile of at least Rs 25,000 crore. The company started facing financial trouble from its stranded power and coal projects around five years earlier.

However, the auction notice issued for the Tamil Nadu property has come as a surprise to many — it shows GVK's apparent inability to adjust even a relatively smaller loan amount to save itself from public embarrassment. Observers say the bank's move is part of a 'name and shame' strategy to recover its loan. 

Long delay by the Centre in clearing a foreign direct investment proposal involving the sale of GVK stake in the Bangalore International Airport project to Canada-based Fairfax for Rs 2,300 crore was also said to have aggravated the financial distress in the company.