Hyderabad: Aconsortium headed by Maytas Infra Ltd has failed to achieve financial closure for the Rs12,312 crore Hyderabad Metro Rail project and has sought an extension for the same from the Andhra Pradesh (AP) government in a move that is as much a reflection of the fate of any company looking to raise money in a market strapped for cash as it is of Maytas’ provenance.
Maytas Infra is promoted and headed by B. Teja Raju, the elder son of B. Ramalinga Raju, the jailed founder of scandal-scarred software firm Satyam Computer Services Ltd, who admitted to have fudged the accounts of the software firm to the tune of Rs7,136 crore over several years.
The metro project was awarded on 8 August 2008 to the Maytas-led consortium that includes Hyderabad-based ferro alloys and power producer Nava Bharat Ventures Ltd, infrastructure lending firm Infrastructure Leasing and Financial Services Ltd (IL&FS) and Thailand’s civil infrastructure firm Italian-Thai Development Public Co. Ltd (Ital Thai). According to the original agreement, Tuesday was the last day to achieve financial closure.
C.V.S.K.?Sarma,?the chairman of Hyderabad Metro Rail Ltd and the state’s principal secretary, municipal administration confirmed that the government has received a letter seeking an extension from Maytas and said, “We are examining it.”
According to an official of Hyderabad Metro Rail who did not want to be identified, the government will take a decision on an extension after discussing the issue with legal experts, especially because the state goes to the polls next month. Apart from not seeking to displease the electorate before the elections, governments also need to ensure they do not flout the Election Commission’s code of conduct on policy decisions. The official added that Hyderabad Metro Rail’s board would meet on Wednesday to discuss the issue.
This official, however, added that the original agreement provided for a 120-day extension to the consortium if it failed to achieve financial closure within the stipulated 180 days. In return, the consortium would have to pay every day after the deadline, 1% of the bank guarantee of Rs240 crore. This amount—Rs24 lakh a day—will have to be paid till financial closure is achieved. Interestingly, the consortium has not met the Tuesday deadline of furnishing the bank guarantee of Rs240 crore and has sought extension on that front as well, according to Maytas Infra spokesperson Anil Uttarwar.
“Since we were unable to achieve the financial closure within the stipulated time, we have sought an extension from the AP government for financial closure,” the Maytas Infra chief financial officer V.V. Rama Raju told Mint.
Maytas Infra owns 26% in the consortium, Nava Bharat Ventures, 16%, while IL&FS and Ital-Thai hold 5% each. The government plans to take a 11% stake in the project, while 37% will be parcelled off among financial partners expected to buy into the project.
The consortium had offered to pay around Rs30,311 crore to Andhra Pradesh as revenue over 35 years, which was one of the key reasons for the government awarding the project to it. Another factor that worked in favour of the consortium was its refusal to take the financial assistance offered by central government to the tune of around Rs1,639 crore as so-called viability gap funding.
Rama Raju said representatives of the consortium members were currently in discussions with the state government. The consortium, in a statement, blamed global recession and the credit squeeze in national and international capital markets for its troubles.
Uttarwar claimed that despite not being able to achieve financial closure, the consortium has made some progress in the project; these include completion of topographic surveys, alignment designs, architectural layouts of stations and preliminary designs for civil works, and the appointment of consultants for engineering, project management and traffic management.
Insisting that Maytas Infra was unable to achieve financial closure for the Machilipatnam port project as well, C. Ramchandriah, convener of Citizens for Better Public Transport (CBPT), a non-profit organization, asked the government to scrap the metro rail project. CBPT had filed a public interest litigation (PIL) before the Andhra Pradesh high court on 26 August last year seeking to stay the project as it did not have the required environment clearances.
While Uttarwar blamed the public interest litigation for some of the company’s ills, Ramchandriah said this was unlikely to be the case.
Uttarwar said “the ongoing PIL is having an extremely deleterious effect on our ability to achieve the financial closure.” Ramchandraiah said “It appears (to be) only a pretext since there was no stay granted by the high court, which only served notices on all the parties and there is no progress on the case. How will this deter the ability of Maytas consortium to achieve financial closure?”
Maytas Infra had come under the scanner of regulators and government departments investigating Satyam. Several of its board members resigned and the company lost a few contracts awarded to it previously. They have been cancelled by the awarding companies and local governments.
Lenders to Maytas, IL&FS, Sicom Ltd and IFCI Ltd acquired around a 30% stake in the company through invocation of shares pledged by some shareholders. These lenders subsequently approached the ministry of corporate affairs, seeking reconstitution of the infrastructure firm’s board of directors.
Following this, the ministry asked the Company Law Board (CLB) to dissolve the board of Maytas entities. Rejecting this plea, CLB allowed the government to appoint four nominees on the company’s board. The government has already appointed two of these.
Shares of Maytas Infra gained 2.41% to close at Rs33.95 each on the Bombay Stock Exchange, on a day that saw the exchange’s benchmark index losing 0.89% to end at 8,864 points. The company had reported Rs1,660.15 crore in revenue and a net profit of Rs99.99 crore for the year ended March 2008.