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Supertech mess: Experts say long wait ahead for creditors including homebuyers; lenders cautious

Supertech went into insolvency on March 25 after the Delhi bench of NCLT admitted a petition filed by Union Bank of India for non-payment of dues. The company plans to move the appellate tribunal with an appeal.

March 25, 2022 / 08:46 PM IST

Homebuyers of Supertech Ltd, the Delhi-based developer which was pushed to bankruptcy court by lenders on March 25, may have a long wait ahead for any resolution. According to legal experts, the resolution of Supertech may stretch beyond the timeframe mandated by the National Company Law Tribunal (NCLT). However, it makes sense for the homebuyers to submit their claims at the earliest, they said.

“Homebuyers should immediately submit their claim forms to the resolution professional and should also actively participate in the insolvency process to help drive the company towards a resolution,” Saurav Kumar, Partner at Induslaw, told Moneycontrol.

"Given that Supertech has exposure to thousands of homebuyers and considering the evidence from similar cases in the past, one cannot rule out some panic among customers, Kumar said. “The real estate sector has so far seen a very limited number of approved resolution plans,” he pointed out.

The case

Supertech went into insolvency on March 25  after the Delhi bench of NCLT admitted a petition filed by the Union Bank of India for non-payment of dues.

The NCLT appointed Hitesh Goel as the insolvency resolution professional (IRP) for Supertech under the Insolvency and Bankruptcy Code (IBC). The tribunal had reserved its order in the case on March 17, 2022, after the one-time settlement proposed by Supertech was rejected by the bank and arguments were heard.

Supertech has been in the news lately after the Supreme Court on August 31, 2021, ordered the demolition of its 40-storey under-construction twin towers located in Noida for violation of building norms in "collusion with Noida officials".

“While all this is happening, the process at NCLT is going to be stagnated. Real estate cases are generally complicated to resolve. There is RERA, consumer courts, IBC, and land problems at play. Usually, lenders take large haircuts in such cases,” Kumar added.

The company, in its statement, said it would approach the National Company Appellate Law Tribunal (NCALT).

“In the interest of homebuyers, preference was given to construction and delivery of projects over repayment of bank dues which can be fulfilled after project completion. As all the projects of the company are financially viable, there is no chance of loss to any party or financial creditor.  The order will not affect operations of any other Supertech Group Company,” the statement said.

This order may impact over 25,000 homebuyers who were awaiting possession of their homes booked with the developer for several years.

Not the first case

Supertech is not the first developer to go under insolvency. Jaypee Infratech went into the insolvency process in August 2017 after the NCLT admitted an application by an IDBI Bank-led consortium.

After a lengthy resolution process that saw many twists and turns Mumbai-based Suraksha group received the approval of financial creditors and homebuyers to take over the company in June 2021, raising hopes for around 20,000 homebuyers of getting possession of their dream flats.

Delay in resolution likely

Experts said a delay in Supertech resolution is likely.

“As per existing laws, resolution procedures need to be completed within a period of 330 days,” said Amit Agrawal, Partner at SNG and Partners.

“However, more often than not it has been seen that this process never gets completed in 330 days. It gets dragged beyond a point and it can take a year or couple of years to go through,” Agarwal added.

Analysts said many of the construction projects that Supertech has executed are old in nature and the cost of construction itself has gone high. Further, some realty players tend to over-leverage for growth and face debt crisis later, an analyst said requesting anonymity.

“The legacy problem with realty players is that they stretch their balance sheet a lot, take debt at higher rates which are not sustainable. You have examples of Amrapali and Jaypee, it takes a long time to go through the entire resolution process, definitely not within a year. I cannot give a range on haircut for lenders but it will be substantial,” said another senior analyst.

Lenders cautious

Lenders to Supertech include Union Bank of India, L&T Finance, Indiabulls Housing Finance, among others.

Even as home buyers are less likely to receive their properties on time, lenders have started to mark Supertech’s account as stressed or non-performing.

In a statement, Indiabulls Housing Finance said it has classified Supertech as an NPA (non-performing assets) account back in October 2018.

“While we cannot share details of client level exposures as per regulatory guidelines, based on legal remedies such as SARAFESI etc. We are already recovering our monies and expect 100 percent recoveries over the next 12-18 months,” Indiabulls said.

On October 21, during an analyst conference call, L&T Finance Holdings MD & CEO Dinanath Dubhashi had said the company had already started doing interest reversal on the account of Supertech.  L&T Finance had already classified Supertech as NPA, Dubhashi had said.

“Yes, of course, if it is NPA, definitely interest reversal has been done….10 percent of the overall portfolio is risky, yes…Will we ever do such a thing again, no,” Dubhashi said.

Piyush Shukla
first published: Mar 25, 2022 08:22 pm