Fighting Over Old Gems

<?xml version="1.0" encoding="UTF-8"?><root available-locales="en_US," default-locale="en_US"><static-content language-id="en_US"><![CDATA[<p><p align="justify"><span class='dropthecap'>A</span>fter Lodha Group's dream run in acquiring land in Mumbai, it is now Indiabulls' turn. Following Lodhas' big-ticket acquisition of a 6-acre government plot for Rs 4,050 crore, the next round of bidding for two National Textile Corporation (NTC) mills — Poddar Mills and Bharat Textile Mills, both in central Mumbai — went Indiabulls' way. Land in Mumbai is not only astronomically expensive; it is also a scarce commodity. The rancour between builders that often spills over into court rooms is, therefore, no surprise.<br /><br />Indiabulls Real Estate had bid hard for the two mills. In the case of the July-end auction for the 2.4-acre Poddar Mills, Indiabulls came through with the highest bid of Rs 475 crore. A week later, Indiabulls repeated the feat with a Rs 1,505-crore clinching bid for the 8.4-acre Bharat Textile Mills. Pipped in the race was Lodha, which had stopped at Rs 1,503 crore.<br /><br />The squabbling started soon after. The Lodhas alleged that the tender terms had been violated. After the auction, NTC took over 45 days to confirm the sale. This, Lodhas claim, was to "promote the interests of Indiabulls". Lodhas also alleged that Indiabulls began pre-launch sales in the two mills even before the payment had been made. "Much higher bids would have been received had it been known that moneys could be raised through sale of units," says a Lodha official. The pitch was further queered by the Lodhas, offering NTC an additional Rs 100 crore for the mill.<br /><br />Indiabulls Financial Services' CEO Gagan Banga has a different story. He says there was a time lag as NTC had to seek clearance for the sale from the Board of Industrial and Financial Restructuring (BIFR). He admits his company had been taking bookings at Rs 18,000-23,000 per sq. ft, but claims pre-launch sales had been permitted by NTC in this case as well as in the past. "We have furnished a bank guarantee for the whole sum on 22 September. The entire cash is with ICICI Bank. There is no question of payment not having been made," says Banga.  <br /><br />Lodha challenged the NTC decision to award Bharat Textile to Indiabulls before the BIFR, but lost. "Once earnest money deposit is returned and accepted by the appellant, no further bidding shall be legally acceptable by NTC," BIFR ruled. The company has now appealed to the Appellate Authority for Industrial and Financial Restructuring (AAIFR) and a decision is awaited.<br /><br />In the case of another central Mumbai NTC mill, the Finlay Mills, the shoe is on the other foot. In this case, two rounds of auctions came a cropper in December 2008 and March 2009. The recession period saw few takers. Finally in August 2009, Lodha was the highest bidder at Rs 657 crore; but that was far below the revised reserve price of Rs 710 crore. Negotiations followed and Lodhas upped their offer to Rs 710 crore. NTC did not accept the revised offer as it felt it could do better later, but BIFR passed a confirming order in favour of Lodha.<br /><br />Indiabulls, which was an initial bidder for the mill at Rs 500 crore, has pointed out that they should also be allowed to revise their bid. Indiabulls is now offering Rs 100 crore more than Lodha. "We are not in court over Finlays, but NTC has gone to AAIFR to get the best price," says Banga.<br /><br />Interestingly, Indiabulls has focused on Mumbai's defunct NTC mills since they come with a clean title. But so have the Lodhas. In a city that is already over-developed, the only source of land is by redeveloping old buildings or buying defunct industries. Even this source has now dried up; but for whatever remains, the fight will be sharp and bitter.<br /><br /></p> <script type="text/javascript"> var intro = jQuery.trim(jQuery('#commenth4').text()) var page = jQuery.trim(jQuery('#storyPage').text()) if (page.indexOf(intro) < 0) { jQuery('#commenth4').attr('style', 'display:block;') } </script> (This story was published in Businessworld Issue Dated 15-11-2010)