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Banks have exposure of Rs8,000 cr to Raju family cos

Banks have exposure of Rs8,000 cr to Raju family cos
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First Published: Wed, Feb 11 2009. 12 31 AM IST

Capital concern: A file photo of Satyam founder B. Ramalinga Raju. A group of lenders is gunning for a seat on the board of Maytas Infra Ltd, which is headed by Teja Raju, the eldest son of Ramalinga
Capital concern: A file photo of Satyam founder B. Ramalinga Raju. A group of lenders is gunning for a seat on the board of Maytas Infra Ltd, which is headed by Teja Raju, the eldest son of Ramalinga
Updated: Wed, Feb 11 2009. 12 31 AM IST
Mumbai: A group of lenders is gunning for a seat on the board of Maytas Infra Ltd, even as a senior Reserve Bank of India (RBI) official told Mint that Indian banks and foreign banks operating in the country have either lent or provided guarantees of around Rs8,000 crore to various companies promoted by the family of B. Ramalinga Raju, the jailed former chairman of Satyam Computer Services Ltd. The RBI official did not want to be named as he is not the official spokesperson for the central bank.
Capital concern: A file photo of Satyam founder B. Ramalinga Raju. A group of lenders is gunning for a seat on the board of Maytas Infra Ltd, which is headed by Teja Raju, the eldest son of Ramalinga Raju. Madhu Kapparath / Mint
Maytas Infra is headed by Teja Raju, eldest son of Ramalinga Raju, who admitted to fiddling with the accounts of the technology services firm he founded. The infrastructure firm has been engulfed by the Satyam mess and lost several contracts since early January.
State Bank of India (SBI), ICICI Bank Ltd, Hongkong and Shanghai Banking Corp. Ltd (HSBC), Citibank NA and HDFC Bank Ltd are the leading bankers to a clutch of firms promoted by the Raju family.
“Banks’ total outstanding to Maytas Infra is to the tune of Rs3,500 crore, of which Rs1,500 crore is fund-based. Additionally, banks also have exposure to Maytas Properties and to select small-time investment companies floated by the Raju family,” added RBI official. “These exposures are mainly in the form of guarantees.”
The central bank, however, is unlikely to tell the banks it regulates what should be done about these exposures. “We are not giving any advice to the banks on business decisions. Based on their risk appetite, they are free to decide if they want to continue to lend to these entities,” the central banker added.
Fund-based exposures are when banks lend cash to companies. Non-fund exposures are credit facilities given by the banks where actual lending is not involved.
Guarantees are one form of non-fund banking services, where the bank picks up the tab in case a company defaults on its obligations.
“ICICI Bank has the largest exposure to the Raju family promoted firms. This includes both fund-based and non fund-based, including guarantees,” said the RBI official. “State Bank of India has an exposure of about Rs500 crore.”
SBI chairman O.P. Bhatt had earlier confirmed in a public statement that his bank has an exposure of around Rs500 crore to Maytas Infra and Maytas Properties. The latter is an unlisted real estate developer.
Charudatta Deshpande, spokesperson of ICICI Bank, in an email response said, “We are one of several bankers to Maytas Infrastructure and are reviewing our exposure. We cannot comment on individual lending exposures. We will issue any disclosures if and when we assess that there is an impact that requires such disclosure. We are monitoring our exposure and exploring possible courses of action with other lenders; cannot comment further at this stage.”
The major lenders to the companies promoted by the Raju family have formed a steering committee which includes SBI, ICICI Bank, Axis Bank Ltd, Punjab National Bank and Allahabad Bank.
This steering committee has been meeting regularly to assess the financial health and sustainability of Maytas Infra.
A fortnight ago, senior bank officials of SBI, ICICI Bank, HSBC and HDFC Bank met Teja Raju in Hyderabad to discuss the financial health of Maytas Infra. “We discussed the financial health of the company with Teja Raju and have demanded that there be a more professional board in place,” said a senior banker from SBI, who did not want to be identified.
“Teja Raju has expressed his consent to inducting a member recommended by the lenders on the Maytas Infra (board) if financial institutions are not comfortable with the running of the company,” said a Bank of India official.
“Theoretically, Maytas Infra has a board in place, but it is much smaller than the requirement. Hence, there is scope for further appointments,” said a senior ICICI Bank official on condition of anonymity, considering the sensitivity of the issue.
“The account continues to be a standard asset as they continue to service their interest dues. However, we are concerned about the future of the company and keeping a close watch. We are in constant dialogue with the company,” added the same ICICI Bank official who did not want to be quoted onsidering the sensitivity of the issue.
“Most of the bank exposure is in the form of guarantees. So far, guarantees worth Rs25 crore have been revoked. So far private players like the Hiranandani group firm have invoked guarantees,” said one banker who is a part of the steering committee.
Gaurantees are invoked by a company when it feels that the awardee would not be able to meet certain conditions listed in the contract, for instance, the inability of the awardee to complete the project on time.
“It’s very clear that the company will need some changes and support in terms of funding and better management support which will help the company get some work in future,” said a senior Axis Bank official who did not want to be quoted.
“None of the banks have disbursed any fresh loan to Maytas Infra,” added the Axis Bank official. “We are also hearing that Infrastructure Leasing and Financial Services Ltd, IFCI Ltd and Sicom Ltd have also sent a letter to the government requesting it to appoint new members on the Maytas board,” added a member of the steering committee.
“These financial institutions have a substantial stake in the company as the promoters of Maytas Infra had pledged the companies shares with them,” he added.
Meanwhile, a committee of secretaries met to review the progress of investigation into the Satyam fraud case, which is being probed by various agencies, including the Serious Fraud Investigation Office, market regulator Securites and Exchange Board of India and the Andhra Pradesh government.
The meeting was held in New Delhi on Tuesday, just a day after Andhra chief minister Y.S. Rajasekhara Reddy requested Prime Minister Manmohan Singh to hand over the probe to the Central Bureau of Investigation.
PTI contributed to this story.
anita.b@livemint.com
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First Published: Wed, Feb 11 2009. 12 31 AM IST
More Topics: Satyam | Ramalinga Raju | Teja Raju | SBI | ICICI Bank |