Behind HDIL downfall lies a failed slum project that became financial drain.
Mumbai: After considered the third largest realty programmer in India,” Mumbai-based Housing Development and Infrastructure Ltd (HDIL) has only spiralled down over the last few years, together with the newest bang being the arrest of its own promoters in relation with one of the country’s largest bank scams.
On Thursday, Mumbai Police’s economic offences wing (EOW) arrested HDIL’s executive chairman Rakesh Kumar Wadhawan along with his son Sarang, the managing director of the company, in accordance with a $ 4,355-crore fraud in Punjab and Maharashtra Co-operative (PMC) Bank.
“Like a kidney stone, this too will pass” Sarang had stated in a meeting with a federal daily last year speaking about the times the business was facing with respect to its rising debt.
Sarang, 42, was confident that he will be able to tide over the financial burden given the firm owned a huge land bank of around 222 million sq. ft. The organization will offload property to repay the debts, he’d stated.
A management graduate from the University of Houston, Sarang joined the family business in 2000. Since then he had taken over the reins of the company.
HDIL, that is largely a slum developer, had come out unscathed during the fiscal collapse in 2008.
To be sure, the Wadhawan household’s businesses span property, financial services and retailstores. Ltd (DHFL), in addition to the household’s other retail and resort companies.
Afterwards Kapil and Dheeraj started another property firm, RKW Developers Ltd, possibly creating friction between the relatives.
Post the downturn, HDIL also started shifting its focus to mainstream residential and business growth.
But the $6,500 crore-MIAL job resulted in the downfall of the firm. The job was supposed to rehabilitate 80,000 families and, in turn, create development rights over 43.4 million sq. ft. But it got stuck midway and an excessive amount of debt has been taken to fund it. The organization, which made listed in 2007, also used up all of the profits of the first public offering to buy additional land parcels for your project.
Subsequently, changing regulatory standards and the protracted slump in the residential housing market worsened the financial mess.
While HDIL is currently fighting for survival from the bankruptcy courtroom after Bank of India hauled into the National Company Law Tribunal (NCLT), something else had been drinking which would open a Pandora’s box of monetary wrongdoings of their Wadhawans.
This moment, the wreck was far deeper and a great deal more entangled within the household. For decades, the Wadhawans, known for their love of gaudy cars, had nearly treated PMC bank as a personal lender.
Last month, the suspended management manager of PMC Bank, Joy Thomas, confessed that the lender’s vulnerability to HDIL stood at $6,500 crore, that will be around 70 percent of the lender’s loan book. This had gone , completely from the radar of the auditors and the RBI for decades.
The partnership could be tracked back when the late Rajesh Kumar Wadhawan, subsequently manager of Land Development Corp. and many other firms run from the Wadhawan family, infused $13 lakh into the bank in 1986-87. Since that time the association between the creditor and the Wadhawan family had only grown.