Auction looms large over debt-ridden GVK Group

HYDERABAD: The debt-ridden GVK Group faces the imminent threat of its assets being auctioned off for the first time after defaulting on repayments amid a crackdown on overdue loans by Indian banks.

Syndicate Bank has served notice of an auction of over 2,500 acre at the GVK Perambalur Special Economic Zone (SEZ) in Tamil Nadu for recovering dues of Rs 175 crore from the promoters of infrastructure giant GVK Power & Infrastructure that operates Bengaluru and Mumbai airports, utilities and other businesses.

The development comes after GVK’s promoters reportedly approached several prospective buyers, including the JSW Group, for the sale of various assets including the Mumbai and Bengaluru airports as part of efforts to prune debt.The company said it’s trying to stave off an auction by repaying the money that’s owed.


GVK Power & Infrastructure, the holding company for the energy, airport, transportation and resources firms, with consolidated debt of over Rs 32,000 crore, is finding it difficult to service loans amid dwindling revenue and accumulating losses. Those who reportedly showed interest in the airport assets included Singapore’s Changi Airport Group, IDFC Private Equity and Germany’s AviAlliance among others.

The infrastructure company posted a net loss of Rs 1,212 crore on a consolidated operational income of Rs 4,164 crore in the year to March 2016, by when consolidated debt had mounted to Rs 32,290 crore. The company operates its businesses through eight subsidiaries, 17 stepdown subsidiaries and two associate companies. Confirming the land sale plan, a senior Syndicate Bank executive said it hopes to raise Rs 260 crore through the proposed auction.

“The balance proceeds of auction under the Sarfaesi Act after recovering our dues will be distributed among other lenders HDFC Ltd and Axis Bank,” he told ET, seeking anonymity. HDFC had extended Rs 1,078 crore of credit facilities to GVK Airport Developers against the same SEZ land. Axis Bank had sanctioned Rs 205 crore to GVK Power & Infrastructure. HDFC holds second charge on the mortgaged property while Axis Bank holds subservient charge.

“The auction is scheduled to take place on March 27,” said the person cited above. GVK Airport Developers, a fully owned subsidiary of listed GVK Power & Infrastructure, owns a majority stake of 50.5% in Mumbai International Airport and a 43% stake in Bangalore International Airport. Further, the company is also looking at developing a second airport in Mumbai and a greenfield airport in Indonesia. CO TRYING TO RESOLVE ISSUE A GVK spokesperson said the company is hoping to resolve the

matter. “The matter is being discussed with Syndicate Bank and we are in the process of settling their outstanding dues shortly,” he said. The person said the default had been the first by GVK Power & Infrastructure that “forced a lender to attempt auctioning the asset” and hoped this won’t come to pass.

“As we are in the process of settling the dues, it is unlikely that the security provided against the loan will be auctioned.” India’s banks, groaning under bad debt, have been conducting an asset-quality review at the direction of the Reserve Bank of India in order to clean up their books and put their financials on a sound footing. That has led to the push to recognise bad debt and recover money that’s overdue.

The Hyderabad-headquartered infrastructure conglomerate invested more than Rs 20,000 crore in various projects in the last twoand-a-half decades and has another Rs 30,000 crore of projects in the pipeline at various stages. The infrastructure giant headed by GV Krishna Reddy suffered several setbacks including fuel shortages at its power stations and has been looking to retire debt for years now through various means including the sale of assets and stakes in various subsidiaries.

The company spokesperson told reporters recently that GVK was looking to slash debt by at least Rs 4,000 crore by the end of the fiscal year to lower interest payments by Rs 600 crore a year from around Rs 2,300 crore now. The Reddy family owns a majority stake of 54.25% in holding company GVK Power & Infrastructure, while foreign institutional investors have 12.43%, banks and mutual funds 1.27%. The remaining 32.05% is with the public.

The spokesperson did not elaborate on factors affecting the financials. But a senior GVK executive, who did not want to be named, said, “Like most of the infrastructure companies in India, GVK is also facing challenging times with overleveraged balance sheet on the one hand and dwindling revenues and accumulating losses on the other, finding it tough to service the mounting debt.