Companies

How HDIL’s Rakesh and Sarang Wadhawan made a back-door entry into a port deal in Maharashtra

P. Manoj Mumbai | Updated on October 10, 2019 Published on October 10, 2019

File picture of Rakesh Kumar Wadhawan and his son Sarang

Privilege Hitech Pvt Ltd, a firm owned by Rakesh Kumar Wadhawan and his son Sarang, the promoters of bankrupt Housing Development and Infrastructure Ltd (HDIL), is the lead strategic investor in a consortium selected by the Maharashtra government to develop a new port at Vijaydurg in the state’s Sindhudurg district.

Privilege Hitech holds a 63 per cent stake in Vijaydurg Ports Pvt Ltd, the special purpose company formed to develop and operate the port, according to a Maharashtra government official.

Privilege Hitech was inducted as a strategic investor after Bengaluru-based Jupiter Capital Pvt Ltd, the original promoter of Vijaydurg Ports, sought permission from the Maharashtra Maritime Board (MMB) to change its partner, after its Malaysian partner Pembinaan Redzai Sdn Bhd pulled out of the project.

Following the request from Jupiter Capital, the state government “passed a resolution to induct Privilege Hitech as a strategic investor”.

Revised equity structure

In the revised equity structure, Jupiter Capital has a 26 per cent stake in the project, with MMB holding the balance 11 per cent. Earlier, Jupiter and Pembinaan Redzai together held an 89 per cent stake in the project, while MMB agreed to take the balance 11 per cent stake.

Jupiter Capital is a venture development, management and investment firm founded by Rajeev Chandrasekhar, following the sale of his stake in mobile service provider BPL Mobile.

Chandrasekhar is now a law maker from the ruling Bharatiya Janata Party (BJP) in the Rajya Sabha.

MMB – the agency tasked with developing ports in the state – had signed a concession agreement with Vijaydurg Ports in March 2008 to develop and operate the port for 50 years. Jupiter Capital was awarded the port project through the memorandum of understanding (MoU) route. This means the project developer was identified without a competitive bidding process, a controversial practice that prevailed in many coastal states in the late 1990s and early 2000s, mainly due to a nexus between politicians and businessmen.

The Maharashtra government has since scrapped the policy of awarding port projects through MoUs. Its new port policy says port developers will be selected through a bidding process.

Vijaydurg port, though, is yet to be constructed as the appraisal process for environmental and coastal regulation zone CRZ) clearances was delayed due to a ban on development activities along the Konkan region a few years ago, which has since been lifted.

Despite the delay, MMB says that the port project has not been scrapped.

“The project has received Terms of Reference (ToR) for environmental clearance from the Ministry of Environment, Forest and Climate Change and further process in underway,” an MMB official said.

Irregularities in PMC Bank

Rakesh Wadhawan and Sarang Wadhawan were arrested last week for their alleged role in the Rs 4,355-crore financial irregularities at the Mumbai-based PMC Bank, which prompted the Reserve Bank of India to impose regulatory restrictions on the lender for six months.

It imposed the restrictions due to concerns over large loans being given to HDIL.

The scam surfaced when PMC informed RBI that the bank’s exposure to HDIL was over ₹6,500 crore — four times the regulatory cap or 73 per cent of its entire assets of ₹8,880 crore.

Published on October 10, 2019
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