Debt-ridden Nafed plans to mortgage Delhi properties

May 25 2014, 20:57 IST
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Move to fetch Rs 265 cr, helping it partially retire Rs 1,800-cr debt. Reuters Move to fetch Rs 265 cr, helping it partially retire Rs 1,800-cr debt. Reuters
SummaryMove to fetch Rs 265 cr, helping it partially retire Rs 1,800-cr debt

Saddled with accumulated losses of about Rs 600 crore and having piled up a debt of Rs 1,800 crore to a consortium of banks, National Agricultural Cooperative Marketing Federation of India (Nafed) is resorting to mortgaging of its prime properties in the capital to stay afloat.

The Debt Recovery Tribunal (DRT) is learnt to have asked Central Bank of India, one of the lenders to Nafed, to complete the valuation of the latter’s three properties — Nafed House (a nine-storeyed building at Ashram Chowk), a cold storage facility located on Lawrence Road and a private residential property in East of Kailash — before being mortgaged to banks.

The proposed mortgaging is expected to fetch the cooperative some R265 crore, helping it retire the debt partially and reduce the interest burden because of which it has been posting net losses since 2007-08.

Thanks to the stressed financial position, Nafed’s operations have been severely crippled. Except the paltry commission it gets from the government for its price support measures, it has little other means of income, as its commercial presence in the farm goods market is almost non-existent now. Nafed hopes that part payment of the debt will enable it to take fresh loans (as Nafed’s account with banks would cease to be NPA) to expand operations.

What did Nafed in was its 2006 decision to become guarantor to unsecured loans of R3,900 crore availed by 29 private companies for undertaking exports in agricultural and non-agricultural items like dry fruits, iron ore, etc.

As several of these debtors defaulted, the onus of interest payment fell on Nafed, forcing it to take debt. The federation has managed to recover R2,900 crore from defaulting partners so far, but the delays have cost it dear (see table).

As a part of settlement of Nafed’s debt, an Escrow account has been opened with Central Bank of India (another major creditor to the cooperative is Oriental Bank of Commerce) where recoveries from the defaulting private companies are being put. The DRT, sources said, asked the defaulted parties in a separate case to pay R200 crore to Nafed as part of arbitration awards.

Source said to facilitate the mortgaging, Nafed recently filed an application before the Delhi Development Authority (DDA) for conversion of its most valuable Lawrence Road property from lease-hold to free-hold for increasing its valuation.

Subsequently, the sources added, Nafed would file another application for conversion of land use from industrial to

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