Suitors opting out of race for Lavasa over fall in realty prices

Haldiram, Oberoi Realty's plans hit; No pick up in demand expected in next 2-3 years

Top suitors of Lavasa Corporation, including Haldiram Snacks Pvt Ltd and Oberoi Realty, have quit the race to acquire the debt-laden company, citing falling real estate prices due to the Covid-19 pandemic.

A subsidiary of construction major HCC, Lavasa had defaulted on bank loans worth Rs 7,700 crore, prompting its lenders to send it to the National Company Law Tribunal (NCLT) in 2018 for debt resolution under the Insolvency and Bankruptcy Code (IBC). Axis Bank has made the highest claim of Rs 1,266 crore against the company.

According to a banking source, demand for real estate has dried up due to the pandemic, with customers as well as companies conserving their cash. 

“There are no takers for real estate in metros and it will take a couple of years for customers to invest in a new hill city, which has now turned into a ghost city,’’ said a source close to the development.

Originally set up by HCC in 2000, Lavasa was developed as a picturesque hill station near Pune in Maharashtra. It defaulted on bank loans after the environment ministry issued a stop-work order to the project in 2010. Since the outbreak of Covid-19, even the weekend traffic in the township has dropped to zero.

Several people awaiting possession of their house have joined the NCLT proceedings and received a seat on the committee of creditors. Many others, who had received keys to their houses, have moved out. When the lenders had first sought bids for Lavasa, several companies had put in bids, including a surprise bid by food major Haldiram Snacks. A few others like Oberoi Realty and UV ARC also submitted their bids.

The banks later decided to seek bids for Lavasa as a consolidated entity. The debt resolution was further delayed when, in June this year, State Bank of India sought a fresh forensic audit after it noticed several inter-connected transactions among Lavasa’s related parties, and said individual audits might not be able to provide a complete overview of the company’s financials. These entities were providing captive power to Lavasa, apart from running basic transport, maintaining and running the convention centre, and running retail operations on the premises of Lavasa Corporation. A separate company was operating a luxury hotel.

Certain transactions, SBI said, were so complicated that it would be difficult for the CoC to interpret the inter-linkages based on individual audit reports for each entity. SBI said a fresh audit would be able to capture such interlinkages through a consolidated forensic report for all entities. "The entire transaction was too complex and we decided to stay away," said a bidder.

Another bidder said it planned to invite other companies to make a joint bid for the entire consolidated entity.