IDBI, ICICI may stay away from Maytas Infra board
Even as IL&FS and IFCI are eager to nominate representatives to the board of troubled infrastructure company Maytas Infra, large banks like IDBI and ICICI Bank have decided to keep away.
By ET Bureau |
MUMBAI: Even as IL&FS and IFCI are eager to nominate representatives to the board of troubled infrastructure company Maytas Infra, large banks like IDBI and ICICI Bank have decided to keep away. The government, which has appointed a board to run software company Satyam, wants to repeat the process at Maytas Infra, another Ramalinga Raju company.
IFCI, IL&FS and Sicom together own a majority stake in Maytas Infra after its promoter Teja Raju, who had pledged shares with these institutions, failed to meet the margin calls. However, lenders too have a significant stake with an exposure of close to Rs 5,000 crore in Maytas Infra in form of direct loan and bank guarantees. Lenders say that the money is locked in projects for which Maytas has created separate special purpose vehicles and a board seat would not be of much help.
Banks are now waiting for the government to act. A number of banking sources close to the development said that the decision not to seek board seats was taken early Thursday morning. ���We are not in the business of running a company. We are basically lenders. Our primary concern is to get back our money,��� said a senior officer from one of the banks.
���We just want to ensure that contracts are completed on time and that none of the clients cancel contracts,��� added bank officials. Sources say that once a new management is in place, banks would be in a better position to restructure the terms loan given to the company. Banks would suffer losses if contracts are cancelled since guarantees issued by them would be invoked.
Maytas Infra has 62 projects involving the construction of roads, bridges, industrial structures, oil & gas exploration as well as power generation and transmission. Usually when a company wins a construction contract, the client, the entity which has commissioned the project, has to makes an advance payment to the construction company to provide capital to start the project.
In return, the company provides a bank guarantee for the amount that it has received as advance payment. In case the client walks out of the project before the work starts, the company is required to pay back the advance money within a due period. Alternatively the client can invoke the bank guarantee to get his cash back. So far, bank guarantees have been invoked in two cases ��� by Vedanta Alumina and KSK Energy.
���The loan structure will have to reworked and the monitoring on the contracts will have to improve. We are looking at setting up a supervisory board ��� comprising professionals from the industry ��� which will monitor the performance of the projects,��� pointed out a senior banker.
IFCI, IL&FS and Sicom together own a majority stake in Maytas Infra after its promoter Teja Raju, who had pledged shares with these institutions, failed to meet the margin calls. However, lenders too have a significant stake with an exposure of close to Rs 5,000 crore in Maytas Infra in form of direct loan and bank guarantees. Lenders say that the money is locked in projects for which Maytas has created separate special purpose vehicles and a board seat would not be of much help.
Banks are now waiting for the government to act. A number of banking sources close to the development said that the decision not to seek board seats was taken early Thursday morning. ���We are not in the business of running a company. We are basically lenders. Our primary concern is to get back our money,��� said a senior officer from one of the banks.
���We just want to ensure that contracts are completed on time and that none of the clients cancel contracts,��� added bank officials. Sources say that once a new management is in place, banks would be in a better position to restructure the terms loan given to the company. Banks would suffer losses if contracts are cancelled since guarantees issued by them would be invoked.
Maytas Infra has 62 projects involving the construction of roads, bridges, industrial structures, oil & gas exploration as well as power generation and transmission. Usually when a company wins a construction contract, the client, the entity which has commissioned the project, has to makes an advance payment to the construction company to provide capital to start the project.
In return, the company provides a bank guarantee for the amount that it has received as advance payment. In case the client walks out of the project before the work starts, the company is required to pay back the advance money within a due period. Alternatively the client can invoke the bank guarantee to get his cash back. So far, bank guarantees have been invoked in two cases ��� by Vedanta Alumina and KSK Energy.
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���The loan structure will have to reworked and the monitoring on the contracts will have to improve. We are looking at setting up a supervisory board ��� comprising professionals from the industry ��� which will monitor the performance of the projects,��� pointed out a senior banker.
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