Lenders To Invite Fresh Bids For Lavasa Corp

Banks that have initiated insolvency proceedings against Hindustan Construction Company’s (HCC) debt-ridden real estate arm Lavasa Corporation, have decided to terminate the process in the absence of any worthy bids for the hillside mega township near Pune.

Recall here that the company approached the National Company Law Tribunal in 2018, which accepted its plea for insolvency on August 30, 2018, to start proceedings under the insolvency and Bankruptcy Code. The move by the debt-saddled company followed an order by the Reserve Bank of India (RBI) in February 2018, under which the banking regulator terminated some restructuring schemes that had kept construction work on Lavasa going.

Even though reviving the project would involve at least $1.5 billion, bidders like Haldiram and Oberoi Realty offered only Rs 5 crore as upfront money.

Since the environment ministry issued a stop-work order on the project in 2010, Lavasa, which was established in 2000, has defaulted on loans worth up to Rs 7,700 crore to lenders including Axis Bank and State Bank of India.

Earlier this month, senior citizens who had invested in the project wrote to Maharashtra Chief Minister Uddhav Thackeray, requesting him to intervene. Even though 34 months had passed since Lavasa approached the NCLT, no final decision or resolution was in sight, they said in their letter.

Conceived by billionaire Ajit Gulabchand, on the lines of the cotton-candy harbor of Italy’s Portofino, the picturesque hillside project, a four-hour drive from Mumbai, would have been India’s first privately built and managed city, had it been completed.

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Now, Lavasa To Go Insolvent

August 2018: After Amrapali, Jaypee and 3C Company, another real estate major is staring at insolvency. In a BSE filing, Hindustan Construction Company (HCC) has stated that the insolvency tribunal has accepted its plea to start proceedings on its debt-ridden real estate arm, Lavasa Corporation. This is the company that has been developing India’s first privately built smart hill city Lavasa near Pune. The city is one fifth of the size of Greater Mumbai, and is planned for a population of three lakh.

The National Company Law Tribunal (NCLT) on accepted the plea of the construction company on August 30 to start proceedings under the insolvency and Bankruptcy Code. Devendra Prasad has been appointed the interim resolution professional (IRP) for the case.

HCC said the project was severely impacted by an environment ministry notification to stop work for jurisdictional reasons.

"The consequent delay of 1.5 years in obtaining clearances affected the project and brand Lavasa in many ways. Operations slowly came to a stand-still due to paucity of working capital and caused Lavasa's investors and  partners to also step back or defer their investment plans," HCC said.

Lavasa Corporation is a joint venture between HCC (68.7 per cent) Avantha Group (17.18 per cent), Venkateshwara Hatcheries (7.81 per cent) and Vithal Maniar (6.29 per cent).

"Lavasa is a very special urban development project and an initiative well ahead of its time. While shareholders' interests have been sacrificed, we are hopeful that the pioneering efforts to grow Lavasa into a thriving smart city will now find stewardship in the hands of a new owner," HCC Director and group CEO Arjun Dhawan said.

A swift resolution through the IBC would benefit all stakeholders, especially customers, who had patiently supported Lavasa through this tumultuous period, he added.

The company has already built over 2,200 apartments and villas, hotels and numerous amenities and services.

With inputs from Housing News