Mumbai-based Hiranandani Group has bought Hirco Plc’s 368-acre Chennai project for ₹2,000 crore, in what is being termed as one of the biggest auctions after the Hiranandani-sponsored project defaulted on its loan from HDFC.

Hirco Plc, an investment firm, raised £350 million (₹3,500 crore) from global investors to fund Hiranandani Group’s Chennai and Panvel townships and the Hiranandanis used the funds to acquire 588 acres in Panvel and 368 acres in Chennai.

The auction was held under the Sarfaesi (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest) Act, which allows lenders to auction residential and commercial properties when borrowers fail to repay loans.

Third time lucky

A person privy to the development said that the deal closed last week after two previous attempts to auction the property failed to attract any interest from developers, given the partly developed state of the project.

According to sources, Hiranandani’s move to buy the property was aimed at squaring off the loan liability to retain its institutional relationships with the lender.

The group’s liability to HDFC of ₹480-490 crore ballooned up to ₹590 crore with the interest component; this was paid to HDFC as part of the settlement. Sources said that Punjab National Bank and Oriental Bank of Commerce had lent money to the Hiranandani Group to pay HDFC as part of the default settlement.

Meanwhile, Hirco Plc, listed on the London Stock Exchange’s sub-market, Alternative Investment Market, announced that it was writing off assets worth £350 million owing to foreclosure of these residential projects in Chennai and Panvel.

Long-running battle

Interestingly, Niranjan Hiranandani, founder of the Hiranandani Group, was chairman of Hirco Plc when the investments were made in both the residential projects. He had to step down in 2010 following allegations of breach of Employee Provident Fund rules, in a case investigated by the Central Bureau of Investigation.

Hiranandani, the erstwhile promoter of both townships, and Hirco Plc have been engaged in a bitter battle over disputed business interests and investments in these two projects for some time now.

In February 2013, Hirco sued Niranjan Hiranandani and his daughter Priya Hiranandani-Vandrevala in the Isle of Man (where these investments were routed from), alleging fraud and misconduct in connection with the company’s investment of over £350 million in these two projects.