A slum project that turned out to be a bottomless pit for HDIL
THE ₹6,500 CR-MIAL SLUMP PROJECT WAS STUCK MIDWAY AND TOO MUCH DEBT WAS TAKEN TO FUND IT
MUMBAI: Once considered the third largest real estate developer in India, Mumbai-based Housing Development and Infrastructure Ltd (HDIL) has only spiralled down over the last few years with the latest knock being the arrest of its promoters in one of the country’s biggest bank scams.
On Thursday, Mumbai Police’s economic offences wing (EOW) arrested HDIL’S executive chairman Rakesh Kumar Wadhawan and his son Sarang, the managing director of the company, in connection with a ₹4,355 crore-financial fraud in Punjab and Maharashtra Co-operative (PMC) Bank.
“Like a kidneystone, even this too will pass,” Sarang had said in an interview with a national daily last year talking about the difficult times the company was facing with regards to its rising debt.
As on March 31, 2019, HDIL’S total debt stood at ₹1,996.43 crore.
Sarang, 42, was confident that he would be able to tide over the financial burden given that the company owned a huge land bank of around 222 million square feet (sq. ft). The firm will offload land to repay the debts, he had said.
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, which is largely a slum developer, had even come out unscathed during the financial meltdown in 2008.
To be sure, the Wadhawan family’s businesses span real estate, financial services and retail. As part of a 2009 restructuring, Sarang and his father Rakesh took complete charge of HDIL, while cousins Kapil and Dheeraj Wadhawan took over the management of Dewan Housing Finance Ltd, as well as the family’s other retail and hotel businesses. Later Kapil and Deeraj also promoters of another real estate firm, RKW Developers Ltd, potentially created friction between the family members.
Post the downturn, HDIL also started shifting its focus to mainstream residential and commercial development. Though the company lost out the ₹15,000 crore Dharavi redevelopment project in 2009 following the bankruptcy of its partner Lehman Brother Holdings Inc., it had secured one of its largest slum rehabilitation project with Mumbai International Airport Pvt. Ltd (MIAL).
But the ₹6,500 crore-mial project led to the downfall of the company. The project was to rehabilitate 80,000 families and, in turn, generate development rights of over 43.4 million sq. ft.
However, the project was stuck midway and too much debt was taken to fund it. The company which got listed in 2007, had also used up all the proceeds of the IPO to buy additional land parcels for the project.
While HDIL is currently fighting for survival in the bankruptcy court after Bank of India dragged it to the NCLT, something else was cooking that would finally open a Pandora’s box of financial wrongdoings of the Wadhawans. For years, the Wadhawans had virtually treated PMC bank as a personal lender.