GVK Power in insolvency, but GVK group continues to pursue interests in other sectors | Company News

GVK’s debt woes have been long-standing. Exactly a year ago, in its FY23 annual report, the company had said it was “hopeful of reaching a one-time settlement with lenders in connection with the Adani Airport Holdings deal.” However, that did not materialize.

Earlier this month, GVK Power and Infrastructure informed the stock exchanges that the Corporate Insolvency Resolution Process (CIRP) had been initiated against GVK Power & Infrastructure pursuant to an order of the National Company Law Tribunal (NCLT) dated July 12. A GVK Power spokesperson declined to participate in the story, citing the insolvency process. The insolvency process was initiated by ICICI Bank in connection with a loan it had given for a coal project in Australia that did not take off.

With the entity now awaiting a new buyer through insolvency proceedings, there are concerns about what will be left of the group and the listed entity. “In the case of dissolution of engineering, procurement and construction (EPC) companies, several challenges include salvaging projects that the company may have, limited tangible assets, etc. Tangible assets may include office space and machinery on construction sites,” said Ashish Pyasi, partner at Aendri Legal.

According to GVK Power’s annual report for fiscal 2023, the Alaknanda hydropower plant was the only revenue-generating asset, while GVK Gautami Power’s assets were being turned off. GVK Industries, another subsidiary of GVK Power, is already undergoing bankruptcy proceedings. Pyasi added, “For potential buyers, the assets may not be as lucrative if the projects are completed. For example, licenses and certificates have limited value as they will help in obtaining/participating in projects. Also, dues on claims will be transferred or realized. Legal rights in pending litigation or project will also be transferred.”

“Selling airports to Adani has ended their airport journey. It would perhaps end their infrastructure and energy space,” said a senior corporate consultant, who did not want to be identified.

In August 2020, GVK Power announced that it and its airport-related subsidiaries had agreed to partner with Adani Airport Holdings to bring them on board as a strong financial investor in its airport business. The board further said the move would help reduce a significant portion of its liabilities. The company’s net debt, as of March 2023, stood at Rs 5,504.3 crore.

“It remains to be seen whether the group returns with a different scale and business interests,” the consultant added. While the group did not disclose details, market regulator Securities and Exchange Board of India (Sebi) said in a 2023 order that the group had set up three family trusts for succession planning purposes.

These family trusts, along with Shalini Bhupal and G Indira Krishna Reddy (both affiliated with the GVK group), hold about 49.47 per cent stake in the listed entity TajGVK Hotels. India Ratings, in a June 2023 report, said the TajGVK management had stated that its business is separate from the GVK group companies, citing the stress and ongoing regulatory probes at GVK.

Additionally, the GVK Group also privately owns a commercial real estate firm, GVK One, which runs a shopping mall in Hyderabad.

Reddy Ventures, a family firm run by GV Sanjay Reddy, says on its website that it invests in pharmaceuticals, data science, technology and venture capital and has a portfolio of five growth-stage companies, including India’s second-largest biopharmaceutical research firm, Aragen, and data science firm Excelra, as well as 25 technology startups in the U.S., India, Africa and Southeast Asia. Sanjay is GVK Reddy’s son and a second-generation member of the GVK group. Text messages to Sanjay Reddy went unanswered.