HCCs dues of Rs 5,000 cr stuck in litigation

Written by Shubhra Tandon | Mumbai | Updated: Mar 6 2014, 09:19am hrs
A year has passed, but Hindustan Construction Companys dues of R5,000 crore, mainly with various government agencies, continue to be stuck in litigation.

Of that, R1,000 crore is being battled out in courts for settlement while the remaining R4,000 crore is at different stages of arbitration, Praveen Sood, group chief financial officer, HCC, told FE.

At last year's annual general meeting (AGM), HCC chairman and managing director Ajit Gulabchand had stated that nearly R5,000 crore remains unpaid to the debt-laden infrastructure company from different government authorities. Of that, R2,500 crore was related to various highway construction projects, and the rest in the hydro-electric sector.

"We earlier had R5,000 crore of claims, the majority of which were in arbitration. Now, at least R1,000 crore of claims have moved from the arbitration stage to courts. The remaining (R4,000 crore) is also moving to the court," said Sood.

The R1,000 crore worth of claims are related to two National Highway Authority of India projects, one National Thermal Power Corporation project, and another related to the Ennore Port. The company did not provide specific details for each claim as they are sub judice.

According to Sood, the governments decision-making ability continues to be tardy and authorities are refraining from taking any call on a matter that is affecting infrastructure businesses across India.

In the last two years, HCC's revenue and profits have suffered due to slow order inflows, execution bottlenecks, rising interest cost and delays in payments by clients. From R18,127 crore in 2010-11, the company's order book had reduced nearly 18% to R14,935 crore at the end of 2012-2013.

In 2012, HCC went in for corporate debt restructuring. Loans to the tune of R3,300 crore were restructured by a consortium of 27 lenders.

The promoters were also asked to bring in R300 crore as part of the restructuring package, which included adjusting the debt in terms of the payback period, providing a concessional rate of interest and advancing further working capital.

Sood said the company is meeting its CDR obligations. "The moratorium got over in January 2014 and we have begun payments as per the schedule," he said.

Also, HCC could be turning the corner on the operational front with the order inflow situation improving and the company returning to the black. It posted a stand-alone net profit of R5.4 crore in the third quarter ended December 31, 2013 against a net loss of R38.5 crore in the same period last year. It reported profits in the previous two quarters as well. At the end of December 2013, HCC's order backlog stands at R13,388 crore.