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Zoom's greed leaves lenders high and dry

The 2008 financial crash hit the developer hard as it took on more projects than it could handle

Abhijit Lele  |  Mumbai 

Image via Shutterstock

The high economic growth rate in the first decade of the 21st century gave wings to dreams of many businessmen. Vijay Choudhary and B L Kejriwal, the men behind Zoom Developers, were no different.

The project development and information technology group operating from Mumbai and Indore took up assorted projects like process plants, chemical & petrochemical plants, steel plants and even auto components.It also bagged a few projects in West Asia and Europe.

Then came the global financial crisis in 2008 and Zoom plunged into a crevasse, said a senior public sector bank.

Bankers and the few who have worked with the group said it had taken on more than it could handle. Lenders and employees are battling with the group for repayments and salary dues. Banks have lent more than Rs 2,500 crore to the group.

  • Rapid expansion in many areas created problems in managing growth
  • Economic downturn, limited management bandwidth hit group’s prospects
  • Dues to lenders and employees began to mount, leading to defaults
  • Promoters face a maze of litigation as bankers tighten noose by filing suits for recovery
  • The Central Bureau of Investigation “actively probing promoters”, says a banker

The group’s offices in Worli here have been shut for long.

The telephones are also dead. The group’s cash flow came under pressure as liquidity tightened in the wake of the financial crash. Banks had issued guarantees for Zoom. The delay in project execution forced project promoters to invoke these guarantees. Hence, it became funded exposure for banks. Banks had taken insurance cover from the Export Credit Guarantee Corporation (ECGC) for their exposure to Zoom. According to a report of the Comptroller and Auditor General (CAG), ECGC had issued 193 counter-guarantees for Rs 2,114 crore in 2003-09 to a consortium of 24 banks led by Punjab National Bank.

These counter-guarantees covered the advance payments received by the exporter from its foreign buyers for executing projects in various countries. However, 190 covers for Rs 2,066 crore were invoked since March 2009 onwards by the foreign buyers as projects hung fire, CAG said. A senior public sector banker said the loans had become non-performing assets (NPA). Banks began to make provisions after classifying their Zoom accounts as NPA in 2010-11. At present, they are selling the collateral assets, with limited success.

The Central Bureau of Investigation is looking into allegations of fraud in loans made to Zoom. A top public sector bank executive said the agency might file a case in future.

A Punjab National Bank senior said, “The legal process is underway but recovery is a slow process. It is a jinxed matter.”

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First Published: Sat, December 07 2013. 22:52 IST