SBI has Rs 500 cr exposure; ICICI Bank has joint venture.
Bankers to Maytas Infrastructure and Maytas Properties are reviewing their exposure to both the companies in view of the rise in risk. The fear is that project delays could result in guarantees being revoked.
With growing controversies around the Ramalinga Raju family-promoted entities, banks will play safe”, said a top official of a public sector bank.
State Bank of India, which has an exposure of less than Rs 500 crore, is reviewing all these accounts and sharing information with both the central government and the Reserve Bank of India to see if there is a need to take proactive action, SBI Chairman O P Bhatt said on the sidelines of 'Vibrant Gujarat’ in Ahmedabad On Monday.
Bhatt, however,said there is no problem with the Maytas accounts and the entire exposure is collateralized. “No personal loans have been given to Raju and his sons,”.he said.
Confirming the review of exposures, ICICI Bank said in a statement, “We are a banker to the company and are reviewing our exposure.” It, however, did not elaborate on the kind and the extent of its exposure.
“We cannot comment on individual lending exposures. We will issue any disclosures if and when we assess that there is an impact that requires such disclosure”, India’s second largest lender said.
According to information put up by Maytas Properties on its website, ICICI Bank and NCC, a Hyderabad-based company, have a joint venture with Maytas Properties for a project named Jubilee Hill Landmark. The project involves development of over one million sq ft of space for a 5 Star hotel, luxury apartments and high-end retail space.
Banks have extended funding support as well as guarantees for projects undertaken by both the companies. These guarantees are given to promoters of projects on behalf of the entities or contractors executing the work. They could be for aspects like completing work within a certain time-frame and the quality of work.
“There is a perception that risks associated with some of the Maytas projects could rise,” the executive said.
IFCI, Sicom and IL&FS Financial Services have extended loans against land and shares pledged by Maytas Infra promoters.
The valuation of land has now come under pressure as property prices have crashed in cities like Hyderabad, making real estate projects uncertain. The controversy over the conduct of the Raju family has made matters worse, a senior public sector bank executive said.
Maytas Infra, run by Ramalinga Raju’s son, had an order book of Rs. 11,554 crore as on September 30, 2008. Its turnover was Rs 354 crore and net profit Rs 17 crore in the second quarter.
Maytas Properties is involved in development of urban infrastructure including residential, hospitality and entertainment space. Being an unlisted entity the performance information and order book data is not available. In December 2008, there was an effort to integrate these two entities with Satyam, but the proposal was cancelled after investor outrage over the issue.
