UPDATED on 29 November 2018, to include clarification from Vistra ITCL, which, in 2016 took over IL&FS Trust Co Ltd
Every passing day, there is some new revelations coming out from the mess of Infrastructure Leasing and Financial Services (IL&FS) and its 348 group companies. IL&FS Trust Co Ltd, a subsidiary of IL&FS group, accepted a value of Rs280 crore as mortgage for a property bought on same day for Rs272 crore, reveals a report.
According
to the report from Savukkuonline, VGN Developers Pvt Ltd paid Rs272 crore for 11.021 acre property in Guindy belonging to Chennai-based Hindustan Teleprinters Ltd (HTL). In the bidding process with bankers led by State Bank of India (SBI), the report says, VGN Developers was the sole bidder who made an offer of Rs272 crore for the property.
"On the same day the deal was finalised, VGN Developers mortgaged the property to IL&FS Trust Co for Rs280 crore. While it is the normal banking standard to pay 80% of the mortgaged property value as loan, VGN Developers purchased this property for Rs272 crore and mortgaged the same for Rs280 crore," the report says.
(Image Courtesy: savukkuonline.com)
Questioning the motive behind this, Rajendra M Ganatra, an insolvency resolution professional and restructuring consultant, says, “For any such funding, there has to be due diligence of the sponsor, the title search, the valuation and a host of other things. Here VGN Developer got the funding with negative contribution of Rs8 crore and also decided to issue debentures. Who rated the debentures, and where was it listed? No prudent lender can do this. That is how a preferred group has been destroyed. There is a need for comprehensive investigative audit of IL&FS group.”
According to Vistra ITCL, the debentures issued by VGN Developers for Rs280 crore were fully subscribed on a private placement by several financial institutions. Later in 2017, the debentures were redeemed by the developer.
The consortium of banks headed by SBI had fixed the reserve price for the HTL property at Rs250 crore and finalised the deal on 19 June 2013 for Rs272 crore with VGN Developers.
"As per registration department records, the guideline value of the said land comes to Rs376.26 crore as on 19 June 2013, when the sale was finalised. VGN Developers paid a stamp duty for a value of Rs376.26 crore and not for the actual sale price of Rs272 crore," the report says.
(Image Courtesy: savukkuonline.com)
Savukkuonline says the HTL land is a high value property. “The land has a permissible built-up space of 2.5 times of the land area. Since the land has been reclassified from ‘industrial’ to ‘residential’, its market value would be more than the guideline value fixed by the government. Further, the land is situated in Guindy, which has locational advantage, nearby airport, and metro connectivity. As per the advertisement placed in newspapers at that time for a realty project just near to the land bought by VGN Developers, the asking price was Rs12,000 per square feet. However, the sale price was finalised far below the market or guideline value.”
Main question here is why would a subsidiary of IL&FS group would accept a higher value for mortgage when the property was bought for less?
According to the data compiled by REDD Intelligence, the debt-ridden IL&FS group holds assets of around Rs1,65,000 crore. Its corresponding total liabilities is around Rs1,32,000 crore. The reported consolidated liabilities at IL&FS (holding company), is around Rs1,06,500 crore and inter-group liabilities is around Rs25,500 crore. Similarly, inter-group assets comes around Rs49,000 crore, indicating an equity of Rs23,500 among the group companies.
Despite running scores of different projects and businesses, IL&FS has reported a loss or meagre profit over the past three years for which data is available.
Over the past 10 days, many of these victims have begun to speak out, especially after the gold-plating of the GIFT City project was exposed by Moneylife.
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