Home / Companies / Hirco board executives allege mismanagement

Mumbai: The board members of Hirco Plc have alleged that the “lack of transparency and mismanagement" by the Hiranandani family has affected the interests of investors in the company.

“Under the preference share agreement, Hirco is supposed to get the principal, interest and a profit split of 60:40," John Chapman, chairman and non-executive director of Hirco, said in an interview on Monday. “We are supposed to receive 12% interest (on the money given to the Hiranandanis), a dividend and share of profits. But we have not received a cent."

Chapman and Peter Barge, senior non-executive director of Hirco, were in Mumbai on Monday to discuss the issue with real estate experts, banks and the Hirco Group, and take stock of the developments.

Hirco is a closed-ended investment company, formed in 2006 to invest in Indian real estate projects to be sourced by Niranjan Hiranandani, his wife Kamal Hiranandani and the entities controlled by them. Niranjan Hiranandani was Hirco’s chairman and his daughter, Priya Hiranandani-Vandrevala, the chief executive, till end 2010.

In 2006, Hirco raised £350 million with an initial public offering on the Alternative Investment Market (AIM) in London and invested the money in two projects in Chennai and Panvel, a central suburb in Mumbai, managed by the Hiranandanis.

However, the projects were not completed, prompting lenders to take action to recover their money.

One of the lenders, the Housing Development Finance Corp. Ltd (HDFC), claimed the Hiranandani-controlled project companies had defaulted on repayment obligations and moved to take over the project through the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest, or Sarfaesi Act, in October.

Ahead of that, in July, Tata Capital Financial Services Ltd, another lender, filed a winding-up petition against Hiranandani Palace Gardens.

In February, Hirco sued Niranjan and Priya, alleging they had committed fraud and other misconduct prior to their resignation as chairman and chief executive, respectively, in 2010.

The claim seeks damages of almost £220 million. Besides, there are two arbitrations cases filed in Singapore against both.

“They are resorting to slander, libel, and defamation, since they have realized that their case is trumped up and false. Currently, both the proceedings are sub judice," said the spokesperson of Niranjan Hiranandani-controlled Hiranandani Construction Pvt. Ltd. “Firdose Vandrevala was chief executive officer and managing director of the developer, Hirco Developments, who was charged with delivering the projects. The Hiranandani Group is not connected with Hirco projects in any way and these projects are neither controlled nor developed by Hiranandani Group," said the spokesman.

“All monies that were invested into the project companies by Hirco Plc. have been put in towards projects in Panvel and Chennai until his time. The Hirco entities invested in the projects in 2007," he said, adding that the sluggish market was the reason that the Hiranandanis could not scale up the project.

Mails and calls to Hirco Developments and Vandrewala did not elicit any response.

“There is a need for a regulator to monitor the developments and create transparency," said Amit Tandon, founder and managing director of proxy advisory firm Institutional Investor Advisory Services. He was not talking specific to this issue.

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