Cloud looms over Adlabs Entertainment's Rs 10-bn loan for theme park

Adlabs Entertainment, which owns the Adlabs Imagica theme park near Mumbai, is facing difficulties over the planned sale of its hotel to help repay loans taken to develop the park. 

The annual report mentions the pending sale to Bright Star Investments, a vehicle of retail major D-Mart’s billionaire owner Radhakishan Damani. The planned acquisition has been affected by a land dispute, show documents reviewed by Business Standard, raising questions on its ability to repay over Rs10 billion of loans.

An arbitrator, who was looking into the land dispute, ruled against easing conditions to enable a sale last month. The lawyer arguing for leniency citing the sale had said due to the onerous condition contained in the orders, it had become impossible for Adlabs to sell the land and the hotel thereon to a third party unless the third party was given a clear marketable title. “In other words, third parties are unwilling to purchase the said properties subject to the outcome of the arbitration proceedings,” noted the August order, reviewed by Business Standard. 

But the order noted that it cannot allow a request for sale of the property without attendant issues being decided. The court said that fears of a default couldn’t be used to obtain a favourable ruling. “How it can take advantage of its own default, to contend that if the properties are not allowed to be sold free from all encumbrances, then their bank account will become NPA and that, it should be treated as due hardship to exercise judicial discretion in their favour.  This ground can hardly be a ground warranting modification of the orders,” said the order. 

An Adlabs spokesperson said the sale was still on. “The order does not preclude the company from proceeding with the hotel sale to the buyer. The hotel sale transaction is still valid and we are in conversation with the buyer to arrive at a suitable structure,” said the person. 

The spokesperson said the sale of the hotel and surplus land is part of a debt resolution plan which is under consideration with the lenders. A lenders’ meeting was recently conducted to initiate the plan, according to the company. The company has been facing issues related to repayment of loans. The June quarter results mention a delay of more than 90 days in the payment of dues to banks and financial institutions. 

The results also mentioned that the company was in the process of selling their hotel-Novotel Imagica.  However, it is pending approvals from lenders, according to the note. 

The June quarter results also mention that sale of surplus land is still under process pending approval from lenders. “This comprehensive debt resolution plan has been presented to the lenders of the company with a view to align its debt obligations with the operational cash flows and arrive at a long-term sustainable solution,” said the Adlabs spokesperson. The firm had raised loans through a consortium led by Union Bank of India. The outstanding secured loan as of March 31 was Rs10.55 billion, according to its annual report. Emails sent to Damani firms Bright Star and D-Mart and queries sent to Union Bank of India did not elicit response.