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Jaiprakash Associates gets a Rs 1,000-cr Deutsche commitment but that’s no comfort for home buyers

The Noida-based company was earlier in talks with Rana Kapoor-promoted Yes Bank as well but finally managed to get the loan commitment from Deutsche only.

 
 
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Jaiprakash Associates has secured a comfort letter from Deutsche Bank promising a loan facility of Rs 1,000 crore for the troubled power to real estate developer, according to sources. But the homebuyers Moneycontrol spoke to are not impressed and insisted they will keep pressing for the handover of the unfinished projects of the company to another party.

The Noida-based company was earlier in talks with Rana Kapoor-promoted Yes Bank as well but finally managed to get the loan commitment from Deutsche only.

The letter may prove to be a shot in the arm for the Manoj Gaur family as it tries to save Jaypee Infratech, a subsidiary of the group flagship Jaiprakash Associates.

The fate of Jaiprakash and its unit Jaypee Infratech is in the hands of the Supreme Court which is for now focused on saving the interest of Jaypee’s homebuyers.

There are some 18,000-19,000 homebuyers awaiting the delivery of their flats for seven-to-eight years. Most of them have paid 80 to 90 percent of the cost amounting to at least Rs 50,00,000 for each flat.

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The SC had on May 16 asked Jaiprakash Associates to deposit Rs 1,000 crore with the registrar of the company. It chose to not pay and to its relief, the Supreme Court on July 4 asked the group to deposit Rs 650 crore for now. It did not give a deadline for this.

The Rs 650-crore amount is in addition to its last year’s order to deposit Rs 2,000 crore. The company has so far deposited Rs 750 crore against the previous directive.

Jaiprakash might have got the commitment from Deutsche but it doesn’t mean that the Group is ready to pay up. It wants to be reasonably sure that Jaypee Infratech will remain in its wings and not be sold off to another party, though the latter prospect looks bleak now.

It’s quite likely then that on July 13, when the SC takes up the matter again, Jaiprakash will plead to the Apex Court that Jaypee Infratech’s matter at the Allahabad bench of the National Company Law Tribunal be withdrawn with the company promising to complete the projects in three years, like it had offered in a previous proposal.

Jaypee Infratech had earlier submitted Rs 10,000-crore proposal to repay the creditors as well as complete the projects. The new proposal is likely to centre around that plan, another source said.

Jaypee Infratech owes Rs 9,094.31 crore to a consortium of over a dozen banks led by IDBI Bank. The Life Insurance Corporation of India-owned lender alone has a 44.3 percent share in Jaypee’s total debt.

Hopes for the Gaurs have seesawed in the last six one year as the Gaurs try to salvage the Jaiprakash subsidiary that holds vast tracts of land along the 167-km-long Yamuna Expressway and in Agra.

Jaypee Infratech was one of the 12 companies in the first ever list that Reserve Bank of India prepared last year for loan accounts that needed an immediate resolution of their debt under the Insolvency and Bankruptcy Code.

Jaypee’s case was referred to the Allahabad bench of the National Company Law Tribunal which appointed an insolvency resolution professional to prepare a rescue plan for the company. The 270-day deadline to find a solution to the company’s debt problems under IBC lapsed on May 12.

As per IBC, a company has to be sent for liquidation if no solution is found within that time but not so in this case. This is because the company’s matter is being heard at the SC under ‘public interest’.

In an attempt to secure the interest of hapless home buyers who have booked houses in the various real estate projects of Jaypee, the government brought them at par with financial creditors.

Under the previous code, banks, being secured lenders to the company, had the first right to the company’s cash and other assets. The law is still not clear whether homebuyers will be treated as secured or unsecured lenders but certainly, they are in a better position now and with the matter being at SC, homebuyers can still keep their hopes alive.

Experts Moneycontrol spoke to said that while homebuyers have good reason to not trust Jaypee with the proper completion of the real estate projects, their best bet still lies with the Gaurs.

“Any newcomer would come with the intention of only making money and not for charity. While that’s true of the Gaurs too, the fact that Manoj Gaur is still trying to hold on to his company shows he is still serious about handing over the flats. Not to forget, they know best the project design, they have their men and material at the sites, no one else,” a keen watcher with inside knowledge of the current state of affairs told Moneycontrol.

There were three bidders in the race to buy Jaypee Infratech — Lakshadweep, the Adani group and Kotak Realty Fund-Cube Highways.

In the end, only Lakshadweep, a joint venture of Sudhir Valia-led Suraksha Asset Reconstruction Company and Mumbai-based Dosti Realty, was left in the fray but its Rs 7,000-crore offer was also ultimately rejected by a committee of creditors – over a dozen lenders of Jaypee — as being too low.

According to a note prepared by IDBI Bank, the value of just the immovable assets mortgaged to the IDBI consortium is Rs 17,116 crore while their distress value is pegged at Rs 14,548 crore. Lakshadweep’s Rs 7,000 crore bid pegged Jaypee’s value at less than half of IDBI’s distress scenario number.
Dhirendra Tripathi
first published: Jul 6, 2018 08:55 pm

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