HDFC Sells Rs 869 Crore Unitech Loan To JM Financial’s Asset Reconstruction Unit

With Unitech Ltd. defaulting on loan repayment, housing finance major HDFC Ltd. said it has sold the realty firm's outstanding loan of Rs 869 crore to JM Financial Asset Reconstruction Company (JMFARC).

In a filing to the BSE, HDFC said that Unitech has not been able to service its loan regularly due to sluggish sale of its apartments.

Stating that its current exposure to the Unitech group involves certain projects across various locations, HDFC said "it has assigned the outstanding loans in these projects to JMFARC".

"Against the total dues of Rs 869 crore in respect of these projects, the ARC has paid HDFC Rs 155 crore upfront and has issued security receipts (SRs) to HDFC amounting to Rs 705 crore which will be redeemable over the period of construction," the filing said.

HDFC further said that these accounts were standard assets at September-end, and turned NPA (non-performing assets) only at the end of October, 2016.

In view of irregular payment history, HDFC said it has over the last few quarters, as a matter of prudence, made provisions of Rs 240 crore in respect of these accounts.

"No further provisioning is required as a result of the sale of the loans to ARC," HDFC said.

It further said that after considering the provision of Rs 240 crore already made (34 percent of SRs), the net carrying value of SRs will be Rs 465 crore.

The housing finance company said that Unitech group faced sluggishness in sale of apartments in projects in recent past, affecting the cash flow of the realty firm and adversely impacting progress of the construction work.

This resulted in "irregular servicing of the loans", HDFC said.

Stating that Unitech's all projects are located in prime locations and financially viable but require additional funding,

HDFC said : "JMFARC will arrange for funds to support and kickstart these projects. The progress of the projects and the resultant cash flows will thereafter be closely monitored".

As these projects are financially viable, HDFC said the future cash flows are likely to be sufficient to cover the repayment of the loan with interest thereon.

Gurgaon-based Unitech had a consolidated net debt of Rs 5,265 crore at the end of the first quarter of this fiscal.

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