Lanco Infra claims woes mounting on decision delays by lenders

Lanco Infratech Ltd, one of 12 stressed accounts identified by the RBI for insolvency proceedings earlier this year, has blamed delayed decision-making by its lenders for its woes.

“Whatever proposals we made to the lenders at the SPV level, the decision process from their end has been constantly delayed. Even if the decision is being taken, it happens several months after the set deadline, which requires reconsidering the deal, and again increases the interest cost. This has been happening not just in the case of one project, but across several operation for assets and several projects under implementation,” T Adibabu, Chief Operating Officer, Finance, told BusinessLine .

The Hyderabad-based infrastructure major posted a standalone loss of ₹1,691crore for the first quarter of the current fiscal against a loss of ₹127 crore in the same period last year.

According to Adibabu, the main contributing factor to the widening loss is the invoking of pledged shares by the lenders to Lanco Resources International Pte Ltd (LRIPL) through which the company runs two mines in Australia acquired in 2011. The company's investment of over ₹534 crore and loans including interest of ₹567 crore have to be provided for.

“Another important reason for larger losses is the fact that all the work on the ongoing projects has been stalled... Delays attract additional costs, including finance cost,” Adibabu said.

Lanco Infratech’s total debt exceeds ₹44,000 crore, the second largest among the 12 stressed accounts, with more than half of it being the outstandings of its thermal power projects.

In August, the National Company Law Tribunal (NCLT), Hyderabad Bench, initiated the Corporate Insolvency Resolution Process (CIRP) based on an application filed by one of Lanco’s largest lenders, IDBI Bank. However, according to Adibabu, Lanco Infratech had been looking at various ways to turnaround assets across verticals much before the CIRP process was started.

“In the last four years, because of delays from lenders, the cost of interest in some SPVs has increased to as much as 40 per cent instead of the projected 10-12 per cent,” Adibabu said.

“We are in a situation where the interest cost of under-construction projects of around ₹225 crore is getting added every month without any physical progress,” he added.

The ability of the company to complete ongoing projects —— three thermal power plants and two hydro plants with a capacity totalling 4,500 MW — is largely dependent on the company getting funding support from the lenders.

Among the power plants to be completed, Lanco Group has been trying to achieve financial closure for cost overruns for coal-based Amarkantak and Vidarbha power projects, each of 1320 MW capacity, and the 76-MW Mandakini hydro power project.

Another project is the 500 MW Teesta hydro power project where lenders had decided to convert a part of the debt into equity under the Strategic Debt Restructuring mechanism in 2015.

For its only real estate project, Lanco Hills Technology Park in Hyderabad, a 7.8-million-sq-ft special economic zone (SEZ) and non-SEZ commercial real estate space that is yet to generate cash flows, the company has roped in a development partner DivyaSree Developers.

“These assets need to be brought under operations to create value and be able to either turnaround or monetise them,” Adibabu said.

According to R Venkataraman, Senior Director, Alvarez & Marsal consultancy, the probability of finding a viable resolution plan in the insolvency cases depends largely on the underlying business and assets of the company.

‘Firms which have good operating assets but have defaulted due to unsustainable debt levels, are better placed to find a buyer,” he said adding that sectoral sentiments too play an important role.

When contacted, IDBI Bank and ICICI Bank declined to comment.

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