GVK Power in insolvency, but GVK group continues interests in other sectors

Hyderabad-based GVK Power and Infrastructure, once the GVK conglomerate’s crown jewel, is now under the insolvency process. Long before this latest development, there has been a gradual decline in GVK’s infrastructure and energy ambitions. However, the group’s other business interests continue.

Listed in 2006, GVK Power housed the conglomerate’s prime assets, including airports, highways, and power projects. By the end of FY23, GVK’s only revenue-generating asset was a 330-megawatt (MW) Alaknanda Hydro Power plant in Uttarakhand. The group is believed to be putting a succession plan in place and holds other assets, including a significant stake in TajGVK Hotels, a shopping mall in Hyderabad, and a pharmaceutical venture.

 

GVK’s debt troubles have been long in the making. Exactly a year ago, in its annual report for FY23, the company said it was “hopeful of achieving a one-time settlement with the lenders in view of its arrangement with Adani Airport Holdings.” This, however, did not materialise.

This month, GVK Power and Infrastructure informed exchanges that the Corporate Insolvency Resolution Process (CIRP) has been initiated in respect of GVK Power & Infrastructure by an order of the National Company Law Tribunal (NCLT) dated July 12. A spokesperson for GVK Power declined to participate in the story, citing the insolvency process. The insolvency process was initiated by ICICI Bank in relation to a loan given for a coal project in Australia, which failed to take off.

As the entity now awaits a new buyer under the insolvency process, concerns arise about what remains of the group and the listed entity. “For the resolution of engineering, procurement, and construction (EPC) companies, several challenges include saving the projects a company may have, limited fixed assets, etc. The tangible assets may include office spaces and machinery on project sites,” said Ashish Pyasi, partner at Aendri Legal.

According to GVK Power’s FY23 annual report, the Alaknanda Hydro Power plant was its only revenue-generating asset, while its GVK Gautami Power asset was under shutdown. GVK Industries, another subsidiary of GVK Power, is already under the insolvency process. Pyasi added, “For prospective buyers, the assets may not be that lucrative if the projects are terminated. For example, the licences and certificates are of limited value as they will help in obtaining/participating in projects. Further, claims receivables will be transferred or realised. The legal rights in the pending litigation or project will be transferred as well.”

"The sale of the airports to Adani ended their airport journey. Possibly, this would end their infra and energy space,” said a senior corporate consultant who did not wish to be identified.

In August 2020, GVK Power announced that it and its airport business-related subsidiaries had agreed to cooperate with Adani Airport Holdings to bring them in as a strong financial investor in the airport business. The management then said the move would help reduce a significant portion of liabilities. The company’s net debt, as of March 2023, was Rs 5,504.3 crore.

“One will need to see if the group returns with a different scale and business interests,” the consultant added. Though the group has not divulged details, the market regulator Securities and Exchange Board of India (Sebi) said in an order in 2023 that the group had formed three family trusts for succession planning purposes.

These family trusts, along with Shalini Bhupal and G Indira Krishna Reddy (both related to the GVK group), own around 49.47 per cent stake in the listed entity TajGVK Hotels. India Ratings, in a June 2023 report, said TajGVK's management has stated that its operations are independent of GVK Group companies, referring to the stress and ongoing regulatory investigations at GVK.

In addition, the GVK group also privately owns a commercial real estate business, GVK One, which operates a shopping mall in Hyderabad.

Reddy Ventures, a family office chaired by GV Sanjay Reddy, states on its website that it invests across pharmaceuticals, data analytics, technology, and venture capital and has a portfolio of five growth-stage businesses, including India’s second-largest biopharmaceutical research firm, Aragen, and data analytics business, Excelra, as well as 25 start-ups in the technology space in the US, India, Africa, and South-East Asia. Sanjay is GVK Reddy's son and the second generation of the GVK group. Text messages sent to Sanjay Reddy went unanswered.